Serbian town in the winter

Serbia Monetary Policy January 2020

Serbia: National Bank of Serbia keeps policy rate on hold in January

At its 9 January monetary policy meeting, the executive board of the National Bank of Serbia (NBS) kept the key policy rate at a record low of 2.25%.

The NBS’s decision to keep the rate steady was influenced by the recent recovery in inflation, which reached 1.5% in November, returning to the lower limit of the Bank’s 3.0% plus or minus 1.5 percentage points tolerance band. The NBS expects inflation to fluctuate within the lower half of the target range until mid-2020 and then gradually approach the target midpoint thereafter. The Bank also pointed to the good health of the economy, with a stronger-than-expected performance in 2019 due to robust investment growth and solid consumer spending amid positive developments in the labor market.

In its forward guidance the Central Bank maintained that a cautious monetary policy stance is still justified. The NBS expressed concern about risks related to the international environment, particularly uncertainty regarding commodity markets amid geopolitical risks. The Bank is likely keeping its policy ammunition available in case of a global economic slowdown, while monitoring incoming economic data and foreign exchange market volatility. A small majority of FocusEconomics panelists now expect the NBS to ease rates in 2020. Further rate cuts will be particularly likely if inflation fails to recover as expected or renewed appreciation pressures on the dinar emerge.

The next monetary policy meeting is scheduled for 13 February.

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