Serbia: Central Bank holds rates in September, raises reserve requirements
At its 7 September meeting, the National Bank of Serbia (NBS) held its key policy rate at 6.50%. It also kept the deposit and lending facility rates unchanged at 5.25% and 7.75%, respectively. The decision marked the second consecutive hold and was in line with market expectations.
The Bank’s decision to hold fire was driven by the ongoing disinflationary process in the country, stemming from lower global commodity prices, healthier supply chains and past interest rate hikes, according to the NBS. Additionally, the Bank believes that the full effect of earlier rate hikes has yet to fully materialize. Nonetheless, the NBS did raise reserve requirements to drain excess dinar liquidity.
Going forward, the NBS did not close the door on additional monetary tightening and stated that it would keep a close eye on the inflation outlook, while trying to maintain financial stability and support economic growth.
The next meeting is scheduled for 6 October.
Mate Jelic, analyst at Erste Bank, commented on the outlook:
“In our view, the NBS will keep the key rate unchanged at 6.5% until the end of the year. The already conducted monetary contraction has slowed credit growth, while deposit growth remains stable, thus acting in a disinflationary manner. A large chunk of inflation is still imported; hence, possible new hikes of the key rate would have little effect on headline inflation. Additionally, the remaining dinar liquidity surplus will continuously be mopped up through regular reverse repo operations, thus limiting possible inflationary pressures.”