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The National Bank of Serbia increased the reference interest rate to 5.75 percent

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Dinar loans will become more expensive once again because inflation is high

The increase in the reference interest rate will be reflected in the interest rates in the domestic currency, and that in the most popular cash loans.

Yesterday, the National Bank of Serbia (NBS) increased the reference interest rate to 5.75 percent, by 0.25 percentage points, thereby signaling that money is becoming more expensive, as inflation is still high.

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The increase in the reference interest rate will affect interest rates in local currency, which are mainly the most popular cash loans. However, the increase will not be drastic, because the central bank increased the base interest rate by a quarter of a point, as it did last month.

At the same time, the rate on deposit facilities was kept at the level of 4.5 percent, while the rate on credit facilities was increased to seven percent.

In a few days, it will be known how much inflation was in February, and in January it was observed year-on-year at 15.8 percent.

Still, about two-thirds of the contribution to total inflation is related to the growth of food and energy prices, on which monetary policy measures have a limited effect, because their increase in prices is largely a consequence of events in the international environment.

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The NBS stated that when making the decision to increase the reference interest rate, the executive board had in mind that, despite signs of easing, global cost pressures and import inflation are still high and that it is necessary to limit their indirect effects on price growth on the domestic market.

Thus, the central bank contributes to inflation being on a downward path and returning to the limits of the permissible deviation in the horizon of the projection. The transmission of the previous increase in the reference interest rate to those on the money, credit and savings market indicates the effectiveness of that transmission mechanism of monetary policy through the interest rate channel.

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.

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