serbia

In order to maintain its currency peg, Denmark’s central bank has raised rates 0.25 per cent, matching the earlier increase from the ECB. Danish monetary policy is aimed at keeping the krone pegged to the euro. All four key rates were raised, now standing as follows:

Serbia also raised rates today, taking the highest rate in Europe 25bp higher to 12.5 per cent. The quarter point increase, announced before the ECB’s announcement, is the third this year, but represents a slowdown in tightening. Serbia has been raising rates since mid-2010, typically by half a point or a full percentage point, while the most recent two raises are smaller and follow a long pause.

Inflation has prompted another rate rise in Serbia – but a much smaller one than of late. The key policy rate now stands 25 basis points higher at 12.25 per cent.

Food and oil prices have driven inflation, though the effect of rising import prices has been tempered by the strengthening dinar. 

Belgrade now has the highest benchmark rate in Europe. Serbia’s central bank has raised the key policy rate a whole percentage point to 10.5 per cent, its fourth raise in as many months.

The sharp increase is an attempt to control inflation, which is being pushed up by rising import prices for food. Consumer price inflation was 7.7 per cent in September and the central bank says it was probably above 9 per cent in October, outside the bank’s current target range of 6.5±2 per cent. 

Rising food prices are set to push Serbian inflation above target in October, prompting the central bank to raise the key policy rate 50bp to 9.5 per cent. This is the third rate rise by the National Bank of Serbia since it starting raising rates from a record low of 8 per cent in August.

Inflation in September was 7.7 per cent, within its tolerance band of 6.5±2 per cent; next month, however, inflation is projected to rise above its upper limit of 6.3±2 per cent. 

Amendments to Serbia’s central bank law have been adopted by MPs today that could both help and hinder the Bank’s independence. A new governor is expected soon, now that the law has been approved.

Under the new rules, Serbia’s president will be able to nominate the bank governor. Previously, the governor was previously named and approved by parliament. Parliament will still confirm the nomination by majority vote.

Presidential nomination raises the fear of political meddling. Reuters expands:

The last governor, Radovan Jelasic, resigned in March after six years in office, with analysts saying he was unwilling to ease monetary policy in line with government demands to help the economy, which contracted three percent in 2009.

But many interpret the law overall as strengthening the independence of the bank. Belgrade media 

The Serbian government has nominated Dejan Šoškić as the country’s next central bank governor, Reuters reports. The appointment follows the sudden resignation of the incumbent, Radovan Jelasic, amid growing political pressures to back policies aimed at improving living standards; he will stay until replaced.

A Fulbright alumnus, Professor Šoškić is a lecturer and widely-published author, as well as working in and advising central banks and government institutions. His nomination must be approved by parliament, which could take up to two months. No significant shift is expected in monetary policy: stability will be required to secure a €3bn IMF loan.

The blue chip head of Serbia’s central bank has resigned unexpectedly, with two and a half years left of his term in office. From Reuters:

Serbia’s central bank governor Radovan Jelasic, considered by bankers and investors as a moderate voice of reason during the economic crisis, said on Tuesday that he would resign for personal reasons. 

The Serbian central bank has held the two-week repo rate at 9.5 per cent for the second month. The dinar has recently been falling, restricting policymakers’ options on rate cuts.

The Serbian central bank has left its key policy rate, the two-week repo rate, at 9.5 per cent. The deposit and lending rates are at 7 and 12 per cent, respectively. The key rate, held at its lowest in two years, is the third highest in Europe after Iceland and the Ukraine.

Bloomberg reports extensive strike action in Serbia in response to wage freezes agreed as part of a $3bn loan agreement with the IMF last year. Inflation was 6.6 per cent in December and is rising. The central bank estimates Q1 inflation will come in at the higher end of its target range of 4 – 8 per cent.