Erste sees Serbia's avg inflation at 4.3% y/y in 2024

Serbia's annual consumer price growth slowed down to 6.4% in January, from 7.6% in December, the country's statistical office said on Monday.

"The first print of the year confirmed inflation continues to slow. We expect inflation to fall below the upper bound of the central bank’s target around mid-year," Erste said in a brief statement following the official release of the January inflation figures.

Last week, Serbia's central bank, NBS, said annual inflation is expected to return to the targeted range of 1.5% to 4.5% by the middle of 2024, and approach the target midpoint of 3% late in the year.

Erste noted that the main driver of upside risks to its 2024 average inflation forecast is the re-emergence of supply shocks due to geopolitical conflicts and sticky core inflation due to strong domestic wage and pension growth.

"As for monetary policy moves, the NBS will wait for the ECB and Fed to move first, before cutting its rates, thus also suggesting the first cut might come around mid-year," Erste said.

Earlier in February, NBS kept its repo rate unchanged at 6.5%, reflecting the further reduction of global inflationary pressures, as well as the downward trajectory of domestic inflation. The central bank last changed its key rate in July, increasing it by 25 basis points to 6.5% to counter inflationary pressures.