NBS Increases Key Policy Rate to 2.75%

At its meeting today, the Executive Board of the National Bank of Serbia (NBS) voted to raise the key policy rate by 25 bp to 2.75%. The lending facility rate now equals 3.75% and the deposit facility rate 1.75%, according to the NBS website.

As added, “with a more moderate rate increase than in recent months, the NBS continues to respond to inflationary pressures, having in mind the expected effects of past monetary policy tightening and taking care of the importance of economic growth continuity”.

Y-o-y inflation measured 10.4% in May, with food and energy prices still accounting for around two thirds.

– Higher imported inflation translated into a higher core inflation (headline inflation excluding the prices of food, energy, alcohol and cigarettes) which amounted to 6.3% y-o-y in May – says the NBS website.

Still, this inflation measure, affected more by monetary policy, remains considerably below headline inflation at home, but also below core inflation of regional inflation-targeting countries.

In addition to preserved relative stability of the exchange rate, as pointed out, an important factor behind lower core inflation are medium-term inflation expectations of the financial sector, which continued to move within the NBS target tolerance band.

The Executive Board judges that inflation should return within the target tolerance band (3±1.5%) in H2 2023, on the back of past monetary tightening.

– Despite a high degree of uncertainty, the NBS expects further growth of our economy in the coming period, estimating that the real GDP growth this year will be between 3.5% and 4.5% - it is said.

It is added that, assuming there is no further escalation of geopolitical tensions and cutoffs in global gas supply, “Serbian GDP is projected to grow 4–5% per year in the medium-term”.

Narodna banka Srbije Beograd

National Bank of Serbia

NBS

key policy rate

key policy rate increase

inflation

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