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Serbia Monetary Policy September 2018

Serbia: National Bank of Serbia leaves key policy rate on hold in September

At its 6 September monetary policy meeting, the Executive Board of the National Bank of Serbia (NBS) voted to keep the key policy rate on hold at 3.00%, where it has been since April.

The NBS’s decision to stay put came in the context of headline inflation which is now comfortably within the target band of 1.5%–4.5%, following a period of below-target readings earlier this year. The recent uptick in inflation can be partly attributed to the Bank’s monetary policy easing in the first few months of 2018. Moreover, economic growth was elevated in the first half of the year and with economic agents’ inflation expectations well anchored at 3.0%, the NBS judged that inflation was set to remain within the band going forward. As a result, the NBS saw no need for any further rate cuts. On the flipside, a rate hike would have been premature given that inflation is still in the lower section of the Bank’s target band.

In its communiqué, the National Bank of Serbia offered no clear forward guidance. However, the Bank highlighted that external developments represent the key risk to the outlook—particularly global trade tensions, volatile oil prices and a drying-up of capital flows to emerging markets as developed countries tighten their monetary stances. Subsequently, any future rate moves will likely be closely related to international developments.

The next monetary policy meeting is scheduled for 8 October.

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