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Serbia's c-bank holds key repo rate at 3.0%

Author Maja Garaca
Serbia's c-bank holds key repo rate at 3.0% Author: SeeNews. License: All rights reserved.

BELGRADE (Serbia), August 10 (SeeNews) - Serbia's central bank decided to keep the key policy rate on hold at 3.0%, it said. 

"In making such a decision, the Executive Board was primarily guided by the expected movement in inflation and its underlying factors going forward, and the effects of past monetary policy easing", the NBS said in a statement on Thursday.

Serbia's inflation returned within the target tolerance band and measured 2.3%year-on-year in June, according to the latest official data available.

Inflation is expected to continue to move within the target tolerance band in the next two years, the NBS said. By the end of 2019, it will most probably be below the target midpoint, while gradually approaching the midpoint in the first months of 2019 owing to the low-base effect early this year.

The Executive Board of NBS believes that caution in the pursuit of monetary policy is still needed, primarily in view of uncertainty in the international commodity and financial markets.

"Movements in global oil prices are still volatile, although based on the futures they are expected to stabilise by the end of 2018 and decline somewhat by late 2019", the central bank explained.

Furthermore, leading central banks, the Fed and the ECB, are expected to continue with monetary policy normalisation, which could have an adverse effect on capital flows to emerging economies, while uncertainty also exists with regard to geopolitical and trade tensions. However, the resilience of Serbia's economy to potential negative effects from the international environment has increased, owing to improved macroeconomic indicators and a more favourable outlook for the period ahead, the NBS said.

NBS cut the repo rate by a quarter of a percentage point to 3.25% in March and then to 3.0% in April to help guide inflation to the target band.

The central bank will hold its next rate-setting meeting on September 6.