Serbia Monetary Policy September 2021


Serbia: Central Bank stands pat in September

September 9, 2021

As widely expected by market analysts, the National Bank of Serbia (NBS) left its key policy rate unchanged at the all-time low of 1.00% at its 9 September meeting. This marked the eighth consecutive hold.

In deliberating its decision, the Bank noted that the economy recovered at a stronger-than-anticipated pace in the first half of the year. In its view, this was partly due to a favorable base effect, but also thanks to prior monetary and fiscal policy action. Moreover, prospects remain upbeat, with the Bank highlighting that its “projected GDP growth rate of 6.5% for this year could even be exceeded”. Despite a more pronounced recovery than initially anticipated, the Bank’s inflation expectations remain well-anchored, as it deemed the recent upward trend in price pressures to be partly transitory. The Bank noted that “there are no significant demand-side inflationary pressures”, with core inflation remaining low and stable.

In its press release, the Bank reiterated its commitment “to carefully monitor the trends and impact of the key factors in the domestic and international environment on inflation […] and to adjust its measures accordingly”. However, the Bank turned slightly more hawkish, adding that it “stands ready to respond promptly” if inflationary pressures gain further traction. The majority of panelists polled by FocusEconomics expect the Bank to hold the key rate at 1.00% for the remainder of the year, although some foresee tighter financial conditions.

The next meeting is scheduled for 7 October.

Commenting on the outlook, Mate Jelic, analyst at Erste Bank, added:

“Looking ahead, we expect the NBS to maintain the present course until the end of the year at least. Growth developments year-to-date have been positive and considering the sufficient fiscal space to boost growth further, we do not expect the NBS to cut. On the other hand, with inflation moving close to the middle of the target band, we see no impetus for them to hike. With abundant liquidity in the system and stable interest rates, the overall flavor of monetary policy should remain accommodative overall.”

FocusEconomics panelists project the key policy rate to end 2021 at 1.09% and 2022 at 1.38%.

Author:, Economist

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Serbia Monetary Policy Chart

Serbia Monetary Policy September 2021 0

Note: NBS Reference Rate in %.
Source: National Bank of Serbia (NBS).

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