Serbian town in the winter

Serbia Monetary Policy July 2020

Serbia: National Bank of Serbia keeps key policy rate unchanged in July

On 9 July, the Executive Board of the National Bank of Serbia (NBS) maintained the key policy rate at an all-time low of 1.25%.

In assessing the impact of the Bank’s previous monetary policy actions to mitigate the fallout from Covid-19, the NBS determined that its coordinated effort with the fiscal authorities to support the financial and real sector in the face of the pandemic will facilitate “the fastest possible” economic recovery. The Bank highlighted that low inflationary pressures enabled the stimulus measures that were taken: The NBS expects inflation, which came it at 0.7% in May, to hover around the lower bound of the 1.5%–4.5% target range for the rest of the year on the back of the fallout from the pandemic and low oil prices, although noted considerable volatility in oil prices. Regarding the economic outlook, the Bank signaled that the economy passed the low point of the crisis and expects a recovery going forward.

The next meeting is scheduled for 13 August.

The Bank’s statement was relatively devoid of clear forward guidance, noting that the Executive Board will “continue to keep a close eye on the global developments and their impact on the domestic economy and inflation”, while maintaining full coordination with fiscal policy. Given the uncertain outlook, the Bank could further ease its monetary policy if the economy deteriorates, or if the economic recovery takes longer than expected to materialize. FocusEconomics Consensus Forecast panelists largely expect the Bank to continue reducing the key policy rate this year, with another 25-basis-points cut projected. However, some panelists expect the Bank to stay put.

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