Serbia Monetary Policy August 2018


Serbia: NBS leaves key policy rate on hold in August

August 9, 2018

At its 9 August monetary policy meeting, the Executive Board of the National Bank of Serbia (NBS) voted to keep the key policy rate on hold at 3.0%, a decision that met market expectations.

The NBS considered its decision appropriate in the context of increasing inflationary pressures, as the Bank aims to anchor inflation in its target range of 1.5%–4.5%. Although inflation came in at 2.3% in June, it has been relatively subdued this year, averaging 1.7% in the first six months of the year. Earlier decisions to ease monetary policy resulted in a pick-up in economic activity, with the pace of annual growth in the first quarter nearly doubling that of the fourth quarter of last year. As a result, inflationary pressures should increase, and the Board expects inflation will “continue to move within the target tolerance band in the next two years”. However, due to a low base effect, the Board sees inflation ending next year below the midpoint of its target range.

In its communiqué, the National Bank of Serbia struck a cautionary tone and stated that “caution in the pursuit of monetary policy is still needed, primarily in view of uncertainty in the international commodity and financial markets”. Volatility in oil prices and monetary policy normalization from the Fed and the ECB, as well as a flare up in geopolitical tensions, were mentioned as downside risks to the outlook on the Serbian economy. Subsequently, any future rate moves will likely be closely related to international developments.

The next monetary policy meeting is scheduled for 6 September.

Serbia Interest Rate Forecast

FocusEconomics Consensus Forecast panelists expect the key policy rate to end 2018 at 2.99% and 2019 at 3.39%.

Author:, Economist

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Serbia Monetary Policy Chart

Serbia Monetary Policy August 2018

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

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