NBS: Price stability before higher wages

A better standard for pensioners and citizens in general can be guaranteed by price stability, not increasing wages, says NBS Governor Radovan Jelasic. Speaking to B92, Jelasic said that there was no readiness in Serbia to cut public spending, and that this was one of the reasons why inflation was double the projected figure. NBS: Price stability before higher wages He said that it was necessary to wait for the new government’s economic manifesto to see how a revised budget, and next year’s budget, would generate the funds for an increase in pensions. “I’m firmly convinced that no-one wants to raise pensions and then see their value undermined by the increase in inflation. At the end of the day, let’s focus on real categories, and not live in a monetary cloud cuckoo land. A better standard of living will be brought about by stable prices, not higher earnings, which will then fall, and melt away with higher inflation,” said the National Bank of Serbia (NBS) governor. Although inflation for this year had been projected at six percent, experts estimate that it will be closer to 12 percent. To tackle inflation, the National Bank will be forced to further increase the key interest rate, said Jelasic, which would lead to higher loan repayments. “First, we need to have lower inflation. Only then will we have a lower key interest rate, and only then will loans be cheaper. So, in the same way you don’t get the reverse in other countries, nor can you in Serbia,” stressed the NBS governor. Starting from July 1, interest on current account debt will calculated at 5 percent. Jelasic said that the aim of such measures was to limit debt, which carried a high risk of inflation and a higher trade deficit. Radovan Jelasic (FoNet, archive)

NBS: Price stability before higher wages

He said that it was necessary to wait for the new government’s economic manifesto to see how a revised budget, and next year’s budget, would generate the funds for an increase in pensions.

“I’m firmly convinced that no-one wants to raise pensions and then see their value undermined by the increase in inflation. At the end of the day, let’s focus on real categories, and not live in a monetary cloud cuckoo land. A better standard of living will be brought about by stable prices, not higher earnings, which will then fall, and melt away with higher inflation,” said the National Bank of Serbia (NBS) governor.

Although inflation for this year had been projected at six percent, experts estimate that it will be closer to 12 percent.

To tackle inflation, the National Bank will be forced to further increase the key interest rate, said Jelašić, which would lead to higher loan repayments.

“First, we need to have lower inflation. Only then will we have a lower key interest rate, and only then will loans be cheaper. So, in the same way you don’t get the reverse in other countries, nor can you in Serbia,” stressed the NBS governor.

Starting from July 1, interest on current account debt will calculated at 5 percent.

Jelašić said that the aim of such measures was to limit debt, which carried a high risk of inflation and a higher trade deficit.