Serbia Monetary Policy August 2017


Serbia: NBS holds fire for another month in August

August 10, 2017

At its 10 August monetary policy meeting, the Executive Board of the National Bank of Serbia (NBS) left the key policy rate unchanged at 4.00%, where it has stood for more than a year. Market analysts had expected the decision, given the steady movement of core inflation within the Bank’s tolerance band and the recent easing of inflationary pressures. The rate stands at its lowest level since the Bank introduced its inflation-targeting mandate in 2006.

Given that core inflation has been relatively stable in recent months, the NBS expects to keep a lid on any pronounced changes by maintaining the policy rate as is. Moreover, as a number of adverse weather-related, one-off seasonal factors are dispelled in the short term, the current policy rate should keep inflation moving within the Bank’s target range of 3.0% plus/minus 1.5 percentage points—where it has been since late last year. Furthermore, the currency has sharply appreciated against the dollar since the outset of the year and is expected to remain strong in the coming months, further suggesting that a change to the policy rate would have been unwarranted in August.

In the absence of any strong forward guidance in August, the NBS instead took a particularly cautious approach to recent global developments. Arguing that downside risks to the economy remain largely external, the Bank plans to continue with its wait-and-see approach with regard to heightened uncertainty in global financial and commodity markets. Moreover, the Bank has been clear about the possibility of capital flight should the U.S. Federal Reserve continue hiking rates this year, although any such adverse impacts are expected to be moderate.

The next monetary policy meeting is scheduled for 7 September.

FocusEconomics Consensus Forecast panelists expect the policy rate to end 2017 at 4.17%. In 2018, the panel expects the rate to rise and end the year at 4.54%.

Author:, Economist

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Serbia Monetary Policy Chart

Serbia Monetary Policy June 2017 1

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

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