As the National Bank of Serbia prepares to announce its monetary policy decisions for the upcoming period on Thursday, most economists anticipate that the reference interest rate will remain unchanged, at least until the next meeting in July. Analysts note that while the European Central Bank (ECB) recently reduced its three main interest rates by 25 basis points each in its first monetary easing since 2019, the NBS has maintained its rates for the past nine months.
The ECB’s decision to ease monetary policy was driven by considerations of the inflation outlook, base inflation dynamics, and the effectiveness of monetary policy transmission. Despite a slight increase in the rate of price growth in May compared to April, the ECB reduced its interest rates for main refinancing operations to 4.25 percent, marginal credit lines to 4.50 percent, and deposit facilities to 3.75 percent.
Following a two-day meeting, the US Federal Reserve is also expected to announce its decision on interest rates tonight. Analysts generally predict that there will be no changes this time, with a potential reduction in interest rates anticipated later in the year, possibly in September. Dean Milan Nedeljković from the FEFA faculty suggests that the NBS will likely monitor inflation dynamics both locally and in the Eurozone before considering a rate cut. He emphasizes the importance of not mirroring the ECB’s moves directly and allowing room for market reactions.
Professor Mališa Đukić from the Belgrade Banking Academy highlights the prevailing trend towards gradual interest rate reductions on the money market due to easing inflation pressures in Europe and the US. He notes that the ECB’s rate cut will influence the NBS’s decisions, given the economic interconnectedness between Europe and Serbia. Monitoring the Euribor, which reflects investor expectations, provides insight into potential interest rate changes.
The three-month and six-month Euribor rates have been declining since mid-April, signaling expectations of lower interest rates. This trend bodes well for domestic users of Euro-indexed housing loans, who will see changes in their monthly installments following the expiration of interest rate caps set by the NBS, effective until the end of 2024.
