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Serbia under FX rate pressure following Fitch upgrade - Erste

Author Radomir Ralev
Serbia under FX rate pressure following Fitch upgrade - Erste Source: Statistical Office of the Republic of Serbia

BELGRADE (Serbia), October 7 (SeeNews) - Serbia's central bank is facing foreign exchange rate pressure caused by the decision of Fitch Ratings to upgrade the country's long-term foreign-currency issuer default ratings (IDRs) to 'BB+' from 'BB' in September, Erste Group said on Monday.

"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.