Serbia: NBS leaves rates unchanged in August
At its meeting on 8 August, the National Bank of Serbia (NBS) Executive Board decided to keep the key policy rate at 6.00%, with the rates on deposit and lending facilities also remaining unchanged at 4.75% and 7.25%, respectively. The decision was in line with market expectations.
In justifying its decision, the Bank highlighted that it has reduced the key rate by a cumulative 50 basis points in the last two meetings and that the effect of the cuts is yet to filter through the economy. The NBS noted that, although inflation has fallen within the 1.5–4.5% target band in recent months, notable upside risks to the price outlook remain, including potential spikes in the cost of commodities. Regarding the economy, the Bank stated that the economy grew at a faster-than-expected pace in Q2, which likely gave the Bank more room to pause its monetary easing cycle.
The NBS did not provide specific forward guidance on the future direction of interest rates, but stated that it will continue to make decisions based on the outlook for inflation and the effect of past interest rate cuts, while ensuring it preserves financial stability and supports GDP growth. Our Consensus is for the Bank to deliver 75 basis points of cuts by year-end. The next meeting is set for 12 September.