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Serbia, Reference interest rate is expected to increase at least two more times by the summer

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The executive board of the National Bank of Serbia (NBS) raised the reference interest rate 13 times in a row, the last time on April 6, when it was raised to the level of six percent.

A new session Is scheduled for today, and it is estimated that the central bank will continue to tighten monetary policy.

Professor Milojko Arsić of the Faculty of Economics in Belgrade tells that he expects the NBS to increase the reference interest rate at least two more times by the summer.

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“After two increases, which do not necessarily have to be consecutive in May and June, the key interest rate could remain at the same level when inflation starts to decline,” points out Arsić.

According to him, such a scenario should not be expected before June, because in May we had an “additional inflationary shock” that comes from the increase in electricity and gas prices.

“Also, in April and May we usually have a seasonal increase in the price of agricultural products. It is not certain that this will happen, considering that it is compared to last year’s bad season. So, maybe from June inflation can be expected to calm down, and if that happens, then the reference interest rate could remain at the same level after the second increase,” Arsić explained to

He emphasizes that the preconditions for interest rates to “stand still” are for the agricultural season to be good, and the movements on the world market to be favorable, that is, for prices not to rise.

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How did the value of RKS move in Serbia?

Money in Serbia was the most expensive exactly 15 years ago – at the peak of the great global economic and financial crisis in 2008, the reference interest rate was 17.75 percent. In the following four years, it ranged between 9.5 and 11.5 percent, before a gradual but persistent decrease began in 2014, when it was worth eight percent.

The very next year, It was almost halved to 4.50 percent, and by the end of 2021, it would reach a historic minimum of one percent. It was at that level until April 2022, when the National Bank of Serbia began to tighten monetary policy. Last year it ended at the level of five percent.

At the beginning of May, the reference interest rates of the US Fed and the European Central Bank were already increased by 25 basis points each. The President of the Federal Reserve, Jerome Powell, said in his address that inflation has moderated somewhat since the middle of last year, but that inflationary pressures are still growing.

“The process of returning inflation to the target level of two percent will be long,” concluded Powell and emphasized that the American banking system is healthy and resilient, as well as that conditions in the banking sector have “improved significantly” compared to the beginning of March. Fed reference interest rates are currently the highest in the last 16 years and range from five to 5.25 percent. The ECB explained the decision on further tightening of monetary policy in a similar way.

“Headline inflation has declined over recent months, but underlying price pressures remain strong. At the same time, past interest rate increases are strongly transmitted to the financing of the Eurozone and monetary conditions, while the lag and the strength of the transmission to the real economy remain uncertain”, stated in the ECB announcement regarding the decision to increase the interest rate on the main refinancing operations to 3.75 percent, interest rate rates on the marginal credit line at four and interest on the deposit line at 3.25 percent.

The Fed’s messages about the ”long return to the inflation target” and the ECB’s about the unfavorable movement of core inflation reflect what economists are warning about. “What is quite certain is that interest rates will remain at a high level this year, both in the world and in Serbia,” Professor Milojko Arsić concluded.


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