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Investing.com -- The National Bank of Serbia (NBS) kept its key interest rate unchanged at its July meeting, surprising market expectations.
The central bank’s decision comes as inflation concerns mount due to several factors. Certain commodities on global markets have reached all-time highs recently, while initial estimates suggest Serbia’s domestic agricultural season could be below average.
Additionally, ongoing tensions in global geopolitical relations could potentially lead to higher inflation over the medium term.
Erste Bank (VIE:ERST) has revised its outlook following this development, now expecting just one rate cut this year, likely not before the fourth quarter. The bank noted that inflation will be higher than anticipated at the start of the year.
Erste also identified potential upside risks to inflation from wage growth if not aligned with productivity gains. The Serbian government’s planned public investment programs could further add to demand-side pressures, necessitating close coordination between fiscal and monetary authorities.
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