Serbian town in the winter

Serbia Monetary Policy May 2019

Serbia: NBS keeps key policy rate on hold in May

At its 9 May monetary policy meeting, the Executive Board of the National Bank of Serbia (NBS) voted to keep the key policy rate unchanged at 3.00%, where it has been for over one year.

The Bank continued to deem its current monetary stance appropriate against the backdrop of well-anchored inflation expectations. Inflation rose to 2.8% in March, approaching the midpoint of the Bank’s tolerance band of 3.0% plus or minus 1.5 percentage points. More importantly, the NBS expects it to remain low and stable this year and next. The NBS, however, did note that higher global crude oil prices and volatility in commodity markets due to trade tensions could stoke inflationary pressures.

While the press release was void of forward guidance, a more dovish Federal Reserve and ECB should give the NBS more scope to raise the rate at an even more gradual pace than previously expected. Moreover, although still cautious about the potential secondary effect of capital outflows from monetary tightening in major economies, the Bank remained upbeat about Serbia’s increased resilience to economic shocks thanks to its stronger fiscal stance and adequate coverage of the current account deficit in FDI inflows.

The Bank is expected to release its latest version of the inflation report on 15 May, which will include its newest forecasts for GDP and inflation.

The next monetary policy meeting will be held on 6 June.

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