For the fifth consecutive month, the National Bank of Serbia has maintained the reference interest rate at 5.75 percent, with inflation remaining near the upper limit of the central bank’s target for the past six months. Economist Ivan Nikolić told RTS that he was not surprised by the decision of the Executive Board of the central bank to keep the deposit and credit facility rates unchanged.
Nikolić stated that inflation has stabilized around the upper target, which, according to him, is not bad news. “The more concerning news is that the medium-term or short-term economic outlook in the region has become uncertain. The decisions being made are somewhat reactionary, and the announcements are certainly unsettling for the economic community. They do not have a positive impact on global inflation,” Nikolić explained.
Looking at the situation regionally and globally, especially with regard to the United States, Nikolić sees the National Bank of Serbia’s decision as appropriate.
“The National Bank is responding to the uncertainties and risks that everyone is noticing. It is necessary to continue implementing a cautious monetary policy due to the international environment,” the economist noted.
While Serbia has managed to stabilize inflation and price growth, the situation in surrounding countries is worsening, raising additional concerns.
“In our immediate vicinity, there are countries with inflation rates above five percent. For example, Croatia, which is in the Eurozone, reported a five percent inflation rate year-on-year in January,” Nikolić pointed out.
Nikolić also predicts that the consequences of decisions by the US administration and the escalating trade conflict between Europe and China will become more apparent in the coming period.
“The trade war will intensify significantly in the next few weeks. Inflation will inevitably rise globally. This means that central banks will delay or slow down their interest rate cuts or monetary easing, which had been much needed in the past period,” Nikolić said.
Serbia’s economy was the second fastest-growing in Europe, but Nikolić believes it will be challenging to maintain this growth rate.
“In addition to these global pressures, we are also facing regional issues, such as high prices. A boycott of retail chains, initiated by Croatian consumers, has spread across the region. In my opinion, this is unnecessary because, in essence, it is a sign that prices are indeed high, but it is not a long-term solution,” Nikolić emphasized.
