NBS Raises Key Policy Rate to 5.75%

At its meeting today, the NBS Executive Board voted to raise the key policy rate by 25 bp, to 5.75%. The deposit facility rate was kept at 4.50%, while the lending facility rate was raised to 7.0%, the governor’s cabinet announced.

– In its decision-making, the Board was guided by the persistently high global cost-push pressures and imported inflation, despite the signs of easing, as well as 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 explanation of the decision.

It is added that the transmission of the rate increases so far to the rates in the markets of money, loans and savings signals the effectiveness of the monetary policy transmission mechanism via the interest rate channel.

– Moreover, by maintaining the relative stability of the dinar against the euro, the NBS also significantly contributes to containing the spillover effect of rising import prices on domestic prices, and to overall macroeconomic stability amid elevated global uncertainty – the NBS says.

As stated by the Board, global cost-push pressures have weakened, mostly reflecting falling global energy prices, resolution of supply bottlenecks and reduced container shipping rates, which should lead to the slowing domestic inflation in the coming period.

– Still, China’s lifting of restrictive containment measures could speed up global economic activity and bolster demand for energy and other primary commodities, slowing the decline in global inflation, while greater-than-expected tightening of monetary policies by leading central banks would work in the opposite direction – it is added.

In January, inflation in Serbia measured 1.4% per month, and 15.8% y-o-y, in accordance with the Executive Board’s expectations. As regards economic activity, according to the NBS’s current projection, Serbia’s GDP will post real growth in the range of 2.0% to 3.0% this year, the press release says.

Narodna banka Srbije Beograd

National Bank of Serbia

NBS

key policy rate

increase of key policy rate

inflation in Serbia

growth of Serbian GDP

deposit facility rate

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