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Erste expects Serbia's c-bank to cut key rate to 2.5% by end-2019

Author Radomir Ralev
Erste expects Serbia's c-bank to cut key rate to 2.5% by end-2019 Author: SeeNews. License: All rights reserved.

BELGRADE (Serbia), July 12 (SeeNews) - Erste expects Serbia's central bank to cut its key repo rate to 2.5% from 2.75% by the end of the year to back economic growth, the Austria-based banking group said.

"While there is still a relatively high dose of uncertainty in external environment, growth slowdown in Serbia in 1Q19, surprisingly dovish global central banks stance, low inflation expectations and ongoing disinflationary pressures stemming from strong foreign interest for the dinar all go in favor of further relaxation of the monetary policy," Erste said in an instant comment on Thursday.

Serbia's central bank said on Thursday it decided to cut its key repo rate to 2.75% from 3.0% to back economic growth amid low inflationary pressure. NBS last cut the repo rate by a quarter of a percentage point to 3.0% in April 2018 to help guide inflation to its target band.

The stance of the monetary policy should remain accommodative and growth-supportive, with further interventions on the FX market to tame dinar strength, coupled with occasional swap auctions to boost dinar liquidity, Erste said.

Serbia's average annual consumer price inflation slowed to 1.5% in June, from 2.2% in May, official statistics showed on Friday. On a monthly comparison basis, Serbia's consumer price index (CPI) fell by 0.3% in June, after decreasing by 0.3% in May, according to figures published on the website of the national statistical office.