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Serb c-bank to cut key rate to 5.25% by end-2024 - Erste

Jun 14, 2024, 10:03:23 AMArticle by Iskra Pavlova
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June 14 (SeeNews) - Serbia's central bank, NBS, is expected to cut its key policy rate by an additional 100 basis ponts to 5.25% by the end of 2024, Erste Group analysts said, after NBS trimmed its key repo rate by 25 basis points to 6.25% on Thursday.

Serb c-bank to cut key rate to 5.25% by end-2024 - Erste
Photo: Srbija Danas/Sasa Dzambic

"The cut signals the start of long-awaited monetary easing cycle," Erste Group said in an instant comment on Thursday following NBS' rate cut announcement.

NBS said the reasons for its decision were easing inflation and the European Central Bank (ECB) rate cut by 25 bps announced on June 6.

"In 2025, we expect the NBS to deliver another 125bps in cuts. The pace of cuts would thus be somewhat faster than what is expected from the ECB but with inflation in-check and continuously strong FDI pushing dinar higher, we feel there is space for the mentioned cuts," Erste noted.

Serbia's annual inflation eased to 4.5% in May from 5% in April, returning to the targeted range of 1.5% to 4.5% for the first time since August 2021. NBS has said the target midpoint of 3% should be reached by year-end, with inflation hovering around that level in the medium term.

Previously, NBS last changed its repo rate in July 2023, increasing it by 25 basis points to 6.5% to counter inflationary pressures.

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