DINAR loans become MORE EXPENSIVE: NBS raises key policy rate

At today’s session, the Executive Board of the National Bank of Serbia decided to increase the key policy rate from one percent to 1.5 percent.

As stated, the Executive Board takes into account that inflationary pressures on the global and domestic markets are stronger and more persistent than previously expected and that this requires further tightening of monetary conditions in order to limit the secondary effects on inflation expectations.

This interest rate, according to the NBS website, has the role of a signalling interest rate, as well as the role of a starting interest rate on the market, since the other interest rates on dinars in Serbia are determined precisely based on it. This means that we could expect interest rates on dinar loans to rise as well.

Effects of these measures – stable inflation

The Executive Board recalls that in the previous period, in response to the challenges from the international environment, the National Bank of Serbia also took steps towards gradually increasing the restrictiveness of monetary policy, using the flexibility provided by the existing monetary framework.

„The average weighted rate at repo securities auctions has been continuously and gradually increasing since October 2021 – by 84 basis points in total, until it almost equated with the key policy rate. In addition, the measures of the National Bank of Serbia reduced the dinar liquidity of the banking sector in a controlled and limited manner. The effects of these measures, as well as the current increase in the key policy rate, should contribute to inflation fluctuating at a low and stable level in the medium term,“ said the NBS.

Interest rates on NBS’s deposit and credit facilities are also increased

At the same time, the interest rates on deposit and credit facilities of the National Bank of Serbia also increased – the interest rate on deposit facilities increased to 0.5 percent, and the rate on credit facilities increased to 2.5 percent.

„In the conditions of higher energy product prices and global prices of primary products, with higher transport costs, as well as supply delays and shortages of certain inputs in production at the global level, the increase in import and production prices has intensified since the middle of the previous year. The increase in food prices on the domestic market, in addition to increased costs in the international environment, was also affected by last year’s drought. In addition, the uncertainty that has characterized international commodity and financial markets in recent months due to the emergence of new strains of the coronavirus, has been heightened by the effect of geopolitical tensions and the outbreak of the crisis in Ukraine,“ said the NBS.

Izvor: BIZLife

Foto: BIZLife