Serbian town in the winter

Serbia Monetary Policy October 2019

Serbia: NBS holds rate steady in October

At its 10 October monetary policy meeting, the executive board of the National Bank of Serbia (NBS) decided to keep the key policy rate unchanged at 2.50%. The decision was mainly guided by the Bank’s outlook for inflation as well as the desire to assess the effects of its recent monetary policy easing, given rates were cut twice during Q3.

The decision to stay put came despite inflation edging down to 1.3% in August, which was just outside the National Bank of Serbia’s tolerance band of 3.0% plus or minus 1.5 percentage points. Moreover, the Bank expects inflation to remain low and stable for the near future, giving the Bank potential cause for a rate cut. Nevertheless, the NBS pointed to the continued resilience of the Serbian economy; GDP growth picked up in the second quarter, while strong domestic demand and a pick-up in industrial production should support growth in Q3. Serbia’s sound domestic fundamentals thus gave the Bank leeway to take a wait-and-see approach on monetary policy, and meant a further rate cut was not justified.

Looking forward, the Bank preached that “caution in the monetary policy pursuit is still warranted, mostly due to the developments in the international environment”, suggesting that any easing going forward is likely to be gradual. This is in line with the projections from the majority of our panelists, only some of whom see further rate cuts this year or next.

The next monetary policy meeting is scheduled for 7 November.

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