Central banks have been faced with the difficult task of striking a balance in their response in the current conditions to avoid longer-term overshooting of the inflation target in the event of a milder response, or a more severe recession in the event of a too strong response. How did they respond?
In inflation targeting countries, central banks gradually increased their policy rates, with the intensity and pace of the response more pronounced in countries where both domestic demand and labour market conditions had an inflationary impact. Did the reaction of Serbian authorities come too late? It did not.