The executive board of the National Bank of Serbia (NBS) decided at the session held on February 9 that policy rate will be raised by 25 basis points to 5.5% (chart). At the same session the board decided to increase the rates on deposit and credit facilities by the same amount to 4.5% and 6.5%, respectively.

The executive board said it made the decision as global pressure on the Serbian economy is still very high, despite the signs that peak inflation has passed, and that it is necessary to limit indirect influence on the rise of prices of goods and services.

“With this measure the National Bank will try to return the inflation into the projected path. Today’s increase of referent interest rate is the eleventh since April 2022. and it is increased in this period by 450 basis points,” an NBS statement said. 

“At the same time, by maintaining the relative stability of the exchange rate of the Serbian currency, the dinar, in comparison to the euro, the National Bank of Serbia significantly contributes to the effects of imported goods price growth on domestic prices, as well as to macroeconomic stability in conditions of increased global uncertainty.”

The National Bank said that inflation will likely be 15.1% by the end of 2022, with a third of that due to higher prices of food and energy.

“Despite signs that inflation is slowing down, prices of imported goods are still showing signs of rising which is influencing the inflation. However, in December last year inflation was 10.1% and the executive board expects that inflation will remain high in the first trimester of 2023,” the statement concluded.

The National Bank also noted that agricultural production was less than expected due to the drought last summer.