The Executive Board of the National Bank of Serbia (NBS) has decided to maintain the reference interest rate at 6%, keeping the deposit rate at 4.75% and the credit facility rate at 7.25%. This decision follows a 50-basis-point reduction in the reference rate over the previous two meetings, allowing time to assess the impact of these measures. Despite inflation returning within the target range, the NBS emphasizes the need for continued caution due to ongoing geopolitical risks and their effects on global energy and primary product prices.
The NBS highlighted that uncertainties in global oil price trends and the impact of changing economic prospects in China are significant factors influencing their cautious approach. The bank also noted that global inflation is expected to decelerate more slowly than previously anticipated, which will likely lead to a more gradual easing of monetary policies by leading central banks.
Additional caution is warranted due to the uncertain impact of weather conditions on this year’s global and domestic agricultural season. The NBS expects inflation in Serbia, which saw a temporary increase in July due to one-time price hikes for certain food products and regulated services, to slow down and approach the 3% target by next year.
The NBS forecast anticipates that restrictive monetary conditions, reduced import inflation, and lower world oil prices will help further decrease inflation. Additionally, a decline in inflation expectations will support the effectiveness of monetary policy.
The Executive Board also approved the August Inflation Report with updated macroeconomic projections, which will be detailed to the public on August 14. The next meeting to decide on the reference interest rate is scheduled for September 12.
