May 17 (SeeNews) - Serbia's central bank, NBS, said on Tuesday it has decided to hold the key repo rate at 4.25%, in line with market expectations.
"Though inflationary pressures are low and macroeconomic fundamentals continue to improve, the Board assessed that persistent uncertainties in the international commodity and financial markets warrant caution in running monetary policy," NBS said in a statement.
"The potential adverse effect of these external risks is moderated by domestic factors, notably by the narrowed internal and external imbalances, and to a degree, also by the ECB’s accommodative monetary policy stance."
The central bank expects inflation, which reached a 15-month low of 0.4% in April, to gradually accelerate in the second half of 2016 and return to its target band of 2.5%-5.5% at the beginning of next year.
In its CEE Daily note from Tuesday morning, Raiffeisen Research said that subdued price pressures would allow for a continuation of rate cuts after a two-month-pause, but added that given the fact that a new government after the April 24 elections is not formed yet, the NBS would likely prefer to "remain hands-off this time although the time frame for effective monetary transmission narrows increasingly".
The NBS will hold its next rate-setting meeting on June 9.