National Bank of Serbia holds rates in November

Bank extends pause in monetary policy easing: At its meeting on 7 November, the Executive Board of the National Bank of Serbia (NBS) decided to maintain the key policy rate at 5.75%. It also left the rates on deposit and lending facilities unchanged at 4.50% and 7.00%, respectively. The decision marked the second consecutive hold and ran counter to market expectations of a cut of 25 basis points.

NBS remains in wait-and-see mode: Once again, the Central Bank stated that it had cut rates by 75 basis points since June, adding that the effects of these reductions had yet to fully materialize. Moreover, the NBS highlighted that mounting geopolitical risks called for caution. Meanwhile, the Bank acknowledged that inflation slowed further in September and said that it expects it to remain within the 1.5–4.5% tolerance band going forward. However, it added that weak supply of agricultural products in the domestic market due to adverse weather conditions poses an upside risk.

Bank likely to resume monetary policy easing before year-end: The Bank did not provide specific forward guidance. Instead, it reiterated that it will closely monitor and analyze domestic and international market developments. Most of our panelists expect the Bank to resume its monetary policy easing cycle at its last 2024 meeting on 12 December. Our Consensus is for a cumulative rate reduction of around 125 basis points by end-2025.

Panelist insight: Mate Jelic, analyst at Erste Bank, commented: “We expected one more cut this year, but that is no longer the case. It seems likely that most CB will now opt to wait and see what the new US administration puts in motion, given that possible introduction of tariffs could lead to higher global inflation.”

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