The National Bank of Serbia (NBS) has again raised the benchmark interest rate by 25 bp, to 5.5 percent. The rates on deposit and credit facilities were raised by the same percentage, to 4.5 percent and 6.5 percent, respectively.
“In its decision-making, the NBS’ Executive 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,” said the NBS in a press release.
It added that, by doing this, “the National Bank of Serbia helps inflation to strike a downward path and retreat within the target tolerance band until the end of the projection horizon.”
The latest hike is the eleventh in a row and since April 2022, the rate has been raised by 450 bp in total. The Executive Board also said that the global growth outlook for this year is somewhat better than expected until recently given that there are signs that global cost-push pressures are easing and that China dropped its zero-Covid policy.
“The weakening of global cost-push pressures reflects falling prices in the energy sector – of gas in Europe and of crude oil globally, the resolution of supply bottlenecks and reduced container shipping rates,” it noted.
However, the Board emphasized that caution should be exercised in monetary policy conduct as more robust growth in China would probably push up the prices of energy and other primary commodities and make it more difficult to fight inflation, which is showing signs of retreating from multi-decade highs globally.”
In addition, the indirect effects of elevated prices of energy and industrial raw materials in the past period are still fueling core inflation and – along with a tight labor market – are slowing the disinflation process in a number of countries.
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