Serbia will probably hold borrowing costs at an eight-year high after unexpectedly pausing a tightening cycle last month and inflation started to ease.
(Bloomberg) — Serbia will probably hold borrowing costs at an eight-year high after unexpectedly pausing a tightening cycle last month and inflation started to ease.
The National Bank of Serbia will leave the one-week repurchase rate at 6% on Thursday, according to 14 out of 18 economists in a Bloomberg survey. Four analysts expect an increase of a quarter percentage point.
“As inflation finally started to decline, the NBS is unlikely to restart its hiking cycle and stability of interest rates is the base scenario for this year,” said Jakub Kratky, a Prague-based analyst at Generali Investments.
Serbia’s consumer-price index dropped in April for the first time in nearly two years, slipping to 15.1%, though still far above the central bank’s target range of 1.5%-3.5%. Officials in Belgrade said last month that price growth was expected to slow to around 8% by the end of the year, while they could resume tightening if necessary by lifting the key rate or using alternative tools.
A latecomer to rate hikes in the region, Serbia’s authorities had sought to shield the economy from high borrowing costs but still had to make 13 straight hikes through April to tame inflation. Halting the tightening cycle brought Serbia into line with regional peers as price pressures begin to ebb.
“There is a good probability that the policy rate has peaked,” Mauro Giorgio Marrano, an economist at UniCredit SpA, said in a June 2 note. “Further hikes are likely if inflation surprises to the upside, if the ECB and the Fed turn more hawkish, or if pressure builds on the currency.”
–With assistance from Harumi Ichikura.
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