Serbian central bank issues statement! Important news for all citizens

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The Executive Board of the National Bank (NBS) today voted to keep the key policy rate on hold, at 5.75%, and did not change the deposit (4.5%) and lending facility (7.0%) rates either, the Serbian central bank has announced.

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The prices of some food inputs in the global exchanges (cocoa and coffee) that recently reached their maximum levels, as well as the effects of the last year's drought and reduced supply of fruit and vegetables, triggered accelerated y-o-y growth in domestic food prices over the past months, the NBS said in a statement.

Because of high air temperatures, there is a risk that this year's season could be below average as well, and the data released by the Statistical Office indicate that this year's yields of some early fruit cultures are lower than last year.

The Board noted that central banks worldwide, including the NBS, continue to face marked uncertainty regarding protectionist measures of leading world economies and their impact on inflation and economic growth.

The conflict in the Middle East has flared up further, introducing a new risk dimension with regard to global prices of oil and natural gas, though these prices subsided once the truce was announced, the central bank said, and added:

"In such uncertain global circumstances, there is high volatility in global commodity and financial markets, mandating caution in the conduct of monetary policy. The Board also took into account the ECB's continued accommodative stance in June, which should reflect on more favorable euro-indexed lending in Serbia, while the current announcements suggest that the Fed will be more cautious in monetary policy easing going forward."

Such decisions by the Fed could be prompted by the emergence of heightened inflationary pressures due to additional tariffs imposed, which could also affect capital flows toward emerging economies. Y-o-y headline inflation slowed to 3.8% in May, and core inflation to 4.6%, the NBS announced.

"However, as the prices of petroleum products rose on the back of elevated global oil prices in June and the anticipated effects of adverse weather on food prices, y-o-y inflation will most likely post a temporary pick-up in the coming months, trending around the upper bound of the target tolerance band," the statement said.

According to the Statistical Office's estimates, in the January–May 2025 period y-o-y growth in industrial production equaled 2.5%, driven primarily by intensified activity in manufacturing (4.2%), where the effects of increased investments in the car industry played out.

Goods export also recorded a relatively high y-o-y growth on this account (10.2% in the five months), while goods import rose faster (11.5% in the five months) due to the ongoing investment cycle and the rising disposable income.

Looking at May alone, y-o-y growth in goods export considerably outshone goods import (17.3% vs. 6.8%), the central bank said.

Activity indicators in the services sector were also more favorable in May than in April and during Q1, which is primarily indicated by the stepped-up turnover in retail trade – 5.6% y-o-y in May, after 0.8% in the first four months of the year.

The Executive Board expects economic activity to pick up in the remainder of the year, notably thanks to the already evident production increase in the car industry, as well as the realization of infrastructure projects envisaged within the Serbia EXPO 2027 program.

Support to economic growth also comes from corporate and household lending growth of more than 11% y-o-y in May, attributable to the past monetary policy accommodation by the NBS and the ECB, and more favorable borrowing conditions.

"The Executive Board will continue to follow and analyze developments in the domestic and international markets and make monetary policy decisions on a meeting-to-meeting basis depending on the incoming data, the outlook for inflation and its key factors, and the assessment of the effects of adopted monetary policy measures. In making its decisions, the Board will remain mindful of the preservation of financial stability and a favourable growth outlook," the NBS concluded.

On August 7, the Executive Board will hold the next rate-setting meeting and consider current economic developments and adopt the August Inflation Report that contains the latest macroeconomic projections.

(Telegraf.rs/Tanjug)