11 Aug 2022

NBS Hikes Interest Rates Again

The Executive Board of Serbia’s Central Bank (“NBS”) voted today to raise key interest rates by 25 basis points to 3%, in a fifth hike this year. The credit facility rate is now 4% and the deposit facility rate is 2%, all increased by 25 basis points.

The Executive Board decided that an additional tightening of the monetary policy is necessary, and that year-on-year inflation is expected to peak during the current quarter and then start declining.  In conditions of continued cost pressures and growth of imported inflation beyond all expectations, the NBS is aiming for a balanced approach that will not threaten economic growth.  NBS aims to limit the secondary effects on inflationary expectations and strike a declining trend.

The Executive Board commented on the escalation of unfavorable geopolitical developments which are seen as the main contributor to high energy and food prices, as well as the interruptions in global supply chains, which further cause growth in global inflation.

As already discussed here, central banks around the world tightening monetary policies amid record breaking inflation rates mainly through interest rate hikes. The Central Bank of Serbia (“NBS”) is following suit with a number of interest rate hikes and other measures in attempts to curb inflationary pressures. The last hike was by 25 basis points on July 7.