"Amid low inflation, foreign flows intensified after the Fitch upgrade, putting pressure on the FX rate and restating the need for intervention (by the central bank)," Erste Group said in a macroeconomic insights report.
Last week, Erste said it expects Serbia's central bank, NBS, to cut further its repo rate at the upcoming rate-setting meeting in October if the dinar appreciation tensions continue.
NBS decided to keep its key repo rate unchanged at 2.5% at the latest rate-setting meeting on September 12. The central bank cut the key repo rate by 0.25 of a percentage point to 2.75% in July and to 2.5% in August to help guide inflation to the target band.
The NBS will hold its next rate-setting meeting on October 10.