Serbia Monetary Policy August 2016


Serbia: NBS keeps policy rate unchanged after surprise cut in July

August 11, 2016

At its 11 August monetary policy meeting, the Executive Board of the National Bank of Serbia (NBS) decided to leave the reference rate unchanged at 4.00%, matching market expectations. The rate has been resting at this level since 7 July when the Central Bank cut the rate to the lowest level on record since the NBS introduced an inflation targeting mandate in 2006.

In its brief press release, the Central Bank explained that it based its decision on the latest economic developments and inflation forecast. The Bank pointed out uncertainty surrounding international commodity and financial markets and their impact on “inflation and capital flows to emerging economies”. Despite heightened risks, the NBS is confident that the Serbian economy is capable of withstanding external shocks. The economy has become more resilient due to the successful implementation of structural reforms and fiscal consolidation measures which, in turn, have improved the country’s economic outlook. Regarding inflation, the Bank said that inflation remains below the target and is expected to pick up on the back of “gradual increase in aggregate demand at home and inflation abroad”.

Commenting on the latest policy meeting of the NBS, Junior Analyst Tajana Striga from Addiko Bank said:

“The NBS decision seems reasonable in order to wait to see how already introduced measures will affect inflation and the economy, as well as to have more clarity on movements of ‘core’ central banks in the future. However, given the diminishing dinar depreciation pressures in the recent period, improved EM risk perception, still low inflation, recently formed government and the expected tailwinds from more ECB monetary relaxation as soon as in September, we see room for another rate cut this year.”

The next monetary policy meeting is scheduled for 8 September.

FocusEconomics Consensus Forecast panelists expect the policy rate to end 2016 at 4.11%. For 2017, the panel sees the rate ending the year at 4.48%.

Author: Jean-Philippe Pourcelot, Economist

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Serbia Monetary Policy Chart

Serbia Monetary Policy August 2016 0

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

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