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Serbia Central Bank Maintains Hawkish Stance, Raises Key Rate By 50bps

CEE
  • The National Bank of Serbia (NBS) maintained its hawkish stance in today's meeting and raised its repo rate by 50bps to 2%, above analysts predictions (unchanged) but in line with our expectations.
  • Economic data showed earlier this morning that Serbian inflation accelerated to 9.6% in April (vs. 9.5% exp.), its highest level since June 2013, up from 9.1% the previous month.
  • It is the second time that the NBS is raising its benchmark rate (NBS proceeded with a first 50bps in April) as inflationary pressures continue to accelerate in the CEE region.
    • Prior the Ukraine war, it is likely that Serbia had been partly relying on its CEE peers' 'effort' (NBP, CNB and NBH), hoping that the gradual decline in inflation in H2 2022 will also have an impact on the domestic inflation.
  • In addition, as the Serbian Dinar (RSD) seems pegged to the EUR at 117.60, the NBS may mirror the ECB policy outlook in order to avoid currency interventions as rising interest rate differential will drive RSD higher (vs. Euro).
  • To the exception of Bulgaria, all central banks in the CEE region have now entered a tightening cycle (chart below).

Source: Bloomberg/MNI


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  • The National Bank of Serbia (NBS) maintained its hawkish stance in today's meeting and raised its repo rate by 50bps to 2%, above analysts predictions (unchanged) but in line with our expectations.
  • Economic data showed earlier this morning that Serbian inflation accelerated to 9.6% in April (vs. 9.5% exp.), its highest level since June 2013, up from 9.1% the previous month.
  • It is the second time that the NBS is raising its benchmark rate (NBS proceeded with a first 50bps in April) as inflationary pressures continue to accelerate in the CEE region.
    • Prior the Ukraine war, it is likely that Serbia had been partly relying on its CEE peers' 'effort' (NBP, CNB and NBH), hoping that the gradual decline in inflation in H2 2022 will also have an impact on the domestic inflation.
  • In addition, as the Serbian Dinar (RSD) seems pegged to the EUR at 117.60, the NBS may mirror the ECB policy outlook in order to avoid currency interventions as rising interest rate differential will drive RSD higher (vs. Euro).
  • To the exception of Bulgaria, all central banks in the CEE region have now entered a tightening cycle (chart below).

Source: Bloomberg/MNI