Serbia is likely to tighten monetary policy for a sixth consecutive month as policy makers confront inflation that’s accelerated far beyond their target range.
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Serbia is likely to tighten monetary policy for a sixth consecutive month as policy makers confront inflation that’s accelerated far beyond their target range.
The central bank will lift the one-week repurchase rate by a quarter of percentage point to 3.25% at a meeting on Thursday, according to 10 of 17 economists surveyed by Bloomberg. Five see a half-point increase to 3.5% and two expect no change.
Officials in Belgrade only started raising rates to confront accelerating inflation in April, later than their regional peers. Since then, the cost of borrowing has reached the highest in more than three years.
“Further tightening is justified by high inflation, with the related risk of second-round effects, and monetary-policy tightening by the ECB and the Fed, which could weaken capital flows to emerging markets,” UniCredit SpA analyst Mauro Giorgio Marrano wrote in a research note.
Serbia’s annual inflation rate rose over the past year to 12.8% in July — the highest in almost a decade — and far outstripping the central bank’s tolerance band of 1.5%-4.5%.
Headline inflation will probably peak in September at around 14%, central bank Governor Jorgovanka Tabakovic said last month, as the monetary authority revised upward its previous forecast due to protracted pressures from food and energy prices.
Marrano expects the key interest rate peaking at 4%, barring a significant deterioration of investor sentiment toward emerging markets.
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