RS: NBS on hold

Instant Comment , 10. Okt.
Key rate remains unchanged

Following the pause in August, and then a cut in September, the NBS decided to remain on hold in October, leaving the key rate at 5.75%. They outlined several factors behind the decision effects from previous cuts are still unfolding, geopolitical conflicts and tensions which could affect inflation going forward as well as the fact that obtaining the IG rating should lower country risk premium and allow for more favorable financing conditions.

Going forward we still expect one more 25bp cut by year-end, likely next month in November, which would set the key rate to 5.50%. In 2025, we expect the NBS to deliver another 100bps in cuts. The pace of cuts would thus be more or less similar to what is expected from the ECB by markets but with inflation in-check and continuously strong FDI pushing dinar higher, there could be enough space to squeeze in an extra cut in 2H25.