Monetary policies of central banks in the coming period

Contemporary economic landscape is characterised, among other things, by significant structural changes, increasing rigidity in production and logistics systems, and developments that go beyond traditional cycles of economic fluctuations. Nowadays, the sources of shocks are far more complex - ranging from geopolitics and supply chain disruptions, through energy crises, to technological, climate and environmental risks. Both the sources and the perception of risk are rapidly changing because of disrupted global supply chains and the inflationary pressures they generate, as well as rising geopolitical tensions that are reshaping the patterns of world trade and redefining the global strategic landscape. The altered combination of systemic and idiosyncratic shocks makes it more difficult to distinguish between temporary and permanent changes, as well as to determine appropriate responses to them. With regard to inflation, in recent times inflationary pressures increasingly arise suddenly and originate from the supply side. In addition to traditional factors such as excessive aggregate demand and a tight labour market, the matrix of inflation drivers is further intensified by supply chain bottlenecks and volatile energy prices. Monetary policy is no longer confronted solely with cyclical shocks, but also with deep, often unexpected structural disruptions. Today, when the global economy is entering a period of intensive transformation, preserving price and financial stability also entails enhancing analytical frameworks through the development of multiple scenarios and the integration of economic, climate and technological risks. A well-timed and appropriate response to economic, technological and geopolitical shocks, as well as to ongoing structural changes, requires central banks to carefully combine interest rate policy with other monetary policy instruments and to complement them with prudential and unconventional measures. The practice of the National Bank of Serbia can serve as an example of how appropriate monetary policy by applying a flexible and comprehensive approach helps a small and open economy achieve strong results in a challenging global environment.