BELGRADE (Serbia), July 11 (SeeNews) - 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.
"After considering the current domestic and international economic trends and expectations for the forthcoming period, the executive board concluded that the conditions have been met to reduce the key interest rate to the new lowest level since the introduction of the inflation targeting regime," the central bank, NBS, said in a statement.
Inflation was tightly controlled for the sixth consecutive year, and is expected to stay in the lower part of the 1.5%-4.5% target band by the end of next year, the central bank said.
Serbia's average annual consumer price inflation slowed to 2.2% in May, from 3.1% in April, according to the latest official data available. On a monthly comparison basis, Serbia's consumer price index (CPI) decreased by 0.3% in May, after rising by 0.7% in April.
"The low and stable core inflation has limited the inflationary pressure, as well as the inflationary expectations of the financial and corporate sectors, which were further reduced in June and are below the middle of the target band," the central bank said.
A slower normalisation or a new easing cycle of the monetary policies of the Fed and the ECB should positively affect the international financial markets and stimulate capital flows towards the emerging countries. In addition, global oil prices have fallen, and according to the futures, it is expected to stay around that level by the end of the year, NBS noted
However, the resilience of the Serbian economy to a potential negative impact from the international environment has increased, owing to improved macroeconomic indicators and prospects.
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 central bank will hold its next rate-setting meeting on August 8.