The National Bank of Serbia increased the reference interest rate, inflation is not giving up, News
Yesterday, the National Bank of Serbia (NBS) increased the reference interest rate by 25 basis points to six percent. Inflation is not calming down, it was 16.1 percent in February, so the central bank continues to increase the aforementioned interest rate, which is its main instrument in the fight against price increases. When interest rates rise, money becomes more expensive, which leads to a fall in demand, and consequently, prices should also fall. This has not happened yet, which is why the NBS has been increasing the reference interest rate every month since April last year. Since then, it has increased by five percent, which means that loans in dinars have also become more expensive. After yesterday’s decision, debtors in domestic currency can expect another increase in their monthly debts. Because belibor, the reference interest rate for dinar cash loans, follows the base interest rate of the central bank almost at the same rate.
Next week, information will be known about how much inflation was in March and whether it reached its peak as previously forecast by the NBS. There is still a long way to go for inflation to fall and halve, which is what officials are predicting for this year. The executive board of the NBS not only increased the reference interest rate by six percent, but also the deposit relief to 4.75 percent, as well as the rate on credit relief by 7.25 percent.
When making such a decision, the Executive Board estimated that it is necessary to continue with a moderate tightening of monetary conditions in order not to increase inflationary expectations and to ensure that inflation finds itself on a downward path and returns to the limits of the permissible deviation from the goal in the horizon of the projection. The transmission of the previous increase in the reference interest rate to the interest rates on the money, credit and savings market indicates the effectiveness of the transmission mechanism of monetary policy.
At the same time, by maintaining the relative stability of the exchange rate of the dinar against the euro, the NBS significantly contributes to limiting the spillover effects of import price growth on domestic ones, as well as overall macroeconomic stability in conditions of increased global uncertainty.
The executive board believes that the further drop in prices in the energy sector, as well as the resolution of the deadlock in global supply chains and the reduction of container transport costs have largely contributed to the weakening of cost pressures at the global level, which should also affect the slowdown of domestic inflation in the coming period. Uncertainty regarding global economic growth and the fear that a recession could occur in developed countries influenced an additional drop in the prices of primary products.
Nevertheless, the Executive Board emphasizes that the prudence of the monetary policy is necessary due to the still-present geopolitical tensions regarding the conflict in Ukraine, as well as the fact that the indirect effects of the increased prices of energy and industrial raw materials in the previous period, together with the labor market, still maintain the base inflation at a relatively high level in most countries, which is reflected in import inflation in Serbia. This applies above all to the euro zone, which is our most important trading partner, where, according to preliminary data, despite the decrease in overall inflation to 6.9 percent in March (from 8.5 in February), base inflation recorded a further increase to 5 .7 percent year-on-year (from 5.6 in February.
Sign up for business updates & specials.
- May 11, 2023 Mining Industry, Science and Communications, bridging the gaps
- May 11, 2023 Communicating Energy, new tech industries communications
- May 9, 2023 Serbia economy briefing: Transformation of “Elektroprivreda Srbija”
- April 24, 2023 Without sustainable mining, there is no renewable future
- March 25, 2023 Europe revives mining to reduce dependence on the import of key raw materials, the advantages of Serbia as materials supplier
- March 8, 2023 Calcium Carbonate Industry, Reshaping the Market Growth, Serbian supplier to match European industrial demand
- February 28, 2023 Serbian exploitation miner Belkalhan could become EU primary supplier of Graphite critical raw material
- February 28, 2023 Calcite/calcium carbonate premium quality supplier from Serbia opening supply contracts for 24,25, pharmaceutical/chemical/food processing industry opportunity for JV
- February 16, 2023 Serbian Belkalhan calcite & graphite mining developer invites JV partners for joint critical raw materials exploitation
- February 15, 2023 Petroprocess to modernize EPS power plant CEMS system with state of the art equipment
- June 4, 2023 Serbia, Is gold laying under the dust?
- June 4, 2023 Air Serbia’s popularity and traffic are increasing
- June 4, 2023 Is gold fever taking over in Serbia?