Serbian town in the winter

Serbia Monetary Policy November 2023

Serbia: Central Bank stands pat in November

At its 9 November meeting, the National Bank of Serbia (NBS) held its key policy rate at 6.50%. It also kept unchanged the deposit and lending facility rates at 5.25% and 7.75%, respectively. The decision marked the fourth consecutive hold and was in line with market expectations.

The Bank’s decision to hold fire was driven by the ongoing decline in price pressures—inflation fell for the sixth consecutive month in September—and the expectation that the disinflationary process would continue. The NBS reiterated that it expects inflation to finish the year at around 8.0% and to return to the 0.5–4.5% target band in mid-2024. Moreover, the Bank believes that the full effect of earlier rate hikes has yet to materialize. Meanwhile, the NBS expressed concern regarding conflict in the Middle East and its effect on global commodity prices. That said, barring additional escalation of tensions, the Bank does not expect a major impact on global and domestic inflation.

The Bank’s forward guidance remained muted. The NBS stated that it would continue to monitor inflation drivers at home and abroad and make decisions based on the inflation outlook, while aiming to maintain financial stability and bolster economic growth.

The next meeting is scheduled for 7 December.

Mate Jelic, analyst at Erste Bank, commented on the outlook:

“In our view, the NBS will keep the key rate unchanged at 6.5% until 1Q24. The already conducted monetary contraction has yet to show in full effect. Global inflationary pressures are expected to abate further by the end of this and into next year. Given that the decision was largely expected, we don’t expect any major market reaction.”

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