Serbia: NBS stands pat in February for the fourth consecutive month
February 8, 2018
At its 8 February monetary policy meeting, the Executive Board of the National Bank of Serbia (NBS) maintained its key policy rate at 3.50% for the fourth consecutive month. In making its decision—which was in line with market expectations—the NBS took into account its latest inflation expectations and the expected effects of past monetary policy easing.
The NBS kept the key policy rate at 3.50% to support economic growth and ensure that inflation remains within its target range of 3.0% plus or minus 1.5 percentage points. Inflation accelerated from 2.8% in November to 3.0% in December—hitting the midpoint of the target range—while core inflation notably slowed from 1.4% to 1.3%. Inflation is expected to face downward pressure early this year because of a negative base effect. However, upward pressures this year are expected due to a strong domestic economy and higher disposable incomes, boosted by a higher minimum wage rate and a lower income tax burden.
There was little indication in the NBS’s post-meeting communiqué on the direction of future monetary policy moves. It did note, however, that commodity price uncertainty remains a reason for caution—oil prices, for example, have picked up in recent months—as does uncertainty about monetary policy changes from leading central banks. But, with inflation expected to be slightly below the NBS’s target midpoint in the short term, and core inflation weakening in December, the NBS is unlikely to take a particularly hawkish stance at its next monetary policy meeting on 8 March. Nevertheless, several of our panelists expect a key policy rate rise by the end of this year.
Author: Edward Gardner, Economist