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Serbia's c-bank holds key repo rate at 1.0%

Author Radomir Ralev
Serbia's c-bank holds key repo rate at 1.0% Source: National Bank of Serbia

BELGRADE (Serbia), September 9 (SeeNews) - Serbia's central bank, NBS, said on Thursday it decided to hold its key repo rate at 1.0%.

In making this decision, the central bank was guided by the favourable economic developments and the fact that the real gross domestic product (GDP) growth of 7.6% in the first half of 2021 exceeded expectations, NBS said in a statement, following a rate-setting meeting of its executive board.

The 6.5% GDP growth projected by the NBS for this year could be exceeded, backed by the adopted monetary and fiscal policy measures, and by the preserved investment and consumer confidence, as well as production capacities and jobs, the central bank said.

"Inflation is moving within the 1.5%-4.5% target band and that, consistent with expectations, it stood at 3.3% y-o-y in June and July. Somewhat higher inflation compared to the start of the year reflects temporary factors, notably the low last year’s base, elevated global prices of oil and other primary commodities over the past months, which, along with halts in global supply chains, generated stronger cost-push pressures in the world and domestic markets," the central bank noted.

NBS expects inflation to move within the upper half of the target band until the second quarter of 2022, only to decelerate towards the midpoint with the waning of the effects of this year's rise in global primary commodity prices and cost-push pressures in production and transport. In the second half of 2022, inflation is expected to move in the lower part of the target band, the NBS said.

Uncertainties stem primarily from oil and other primary commodity prices, the NBS noted. "The Fed will most likely not raise its interest rates any time soon, it could decide to scale down by the end of the year its asset purchases within the quantitative easing programme, which could affect capital flows to emerging countries, Serbia included, and therefore calls for caution in monetary policy conduct."

The central bank cut its key repo rate to 1.25% from 1.5% in June 2020 and lowered it further 1.0% in December to counter the adverse economic effects of the coronavirus outbreak.

Serbia's consumer prices rose by 3.3% year-on-year in July, at the same rate as in June. On a monthly comparison basis, Serbia's consumer price index (CPI) went up 0.2% in July, after rising by 0.3% in June, according to the latest figures published on the website of the national statistical office.

The NBS will hold its next rate-setting meeting on October 7.