Key Policy Rate Raised to 5.5%

At its meeting today, the NBS Executive Board voted to raise the key policy rate by 25 bp, to 5.5%. The rates on deposit and credit facilities were raised by the same amount, to 4.5% and 6.5%, respectively.

As said in the press release, in its decision-making, the Board was guided by the persistently high global cost-push pressures, despite the signs of easing, and the necessity to contain their second-round effects on price growth at home through inflation expectations and to impact a part of demand-side pressures.

– The NBS thus helps inflation to strike a downward path and retreat within the target tolerance band until the end of the projection horizon – says the Governor’s Cabinet.

Today’s hike is the eleventh in a row – since April 2022, the rate has been raised by 450 bp in total.

In late 2022, y-o-y inflation measured 15.1%, with around two-thirds still originating from food and energy prices. As in other countries, over the past months the contribution of energy prices has been declining and that of food prices has continued up.

Even though they slowed down, producer and import prices continue to record relatively high y-o-y growth rates, impacting domestic core inflation. However, core inflation continued to move below headline inflation and measured 10.1% y-o-y in December, owing to the relative stability of the exchange rate that was maintained in extremely uncertain global conditions. The Board expects inflation to remain elevated in Q1 this year, as a consequence of continued spillover of the high cost-push pressures from the prior period and the hike in household electricity and gas prices. In the remainder of the year, and especially in the second half, the Board expects inflationary pressures to ease.

According to preliminary SORS data, Serbia’s real y-o-y GDP growth amounted to 0.4% in Q4 and 2.3% in 2022 overall.

The next rate-setting meeting will be held on March 9.

Narodna banka Srbije Beograd

Republički zavod za statistiku Beograd

National Bank of Serbia

NBS

Statistical Office of the Republic of Serbia

SORS

kep policy rate increase

key policy rate

increase of deposit facility

increase of credit facility

year on year inflation in Serbia

inflation in Serbia