Serbia’s central bank lifts rates to 3-year high

Bloomberg

Serbia lifted its benchmark interest rate to the highest level in more than three years, seeking to strike a balance in taming accelerating inflation without undermining economic growth.
The central bank raised its one-week repurchase rate by a quarter percentage point to 3%, in line with expectations of most analysts in a Bloomberg survey. The decision marked the fifth consecutive rate hike.
“Geopolitical events and the escalation of the conflict in Ukraine through global supply chains continue to reflect in the further rise in global inflation,” the central bank said.
Policy makers also raised the credit and deposit rates to 4% and 2%, respectively.
The National Bank of Serbia only joined the trend of monetary tightening in central and eastern Europe in April, after sticking to record-low borrowing costs for over a year and initially relying on alternative tools to confront inflation. It raised the key rate three times by 50 basis points, then slowed the pace with smaller increases.
Serbia’s consumer price growth has been gaining pace for a year, reaching 11.9% in June, driven primarily by food and energy prices.
A Bloomberg survey sees July inflation quickening to 12.3%, before slowing in August.
Rate setters have long focused on core inflation, but even that gauge, at 6.7% in June, has exceeded the Balkan nation’s tolerance band of 1.5% to 4.5%. The central bank said price growth will most likely peak in the third quarter, and it sees the headline figure returning to the target range in the second half of 2023.