January 10 (SeeNews) - Serbia's central bank said on Thursday it has decided to keep its key repo rate unchanged at 3.0%, taking into account inflation forecasts and the recent relaxation of monetary policy.
The inflation rate is expected to remain in the 1.5%-4.5% target band in the next two years, the central bank, NBS, said in a statement.
Serbia's average annual consumer price inflation slowed to 1.9% in November from 2.2% in October, the national statistical office said last month.
On a monthly comparison basis, Serbia's consumer price index fell by 0.3% in November, after increasing by 0.3% in October.
The central bank cut the key repo rate by a quarter of a percentage point to 3.25% in March and slashed it further to 3.0% in April to help guide inflation to the target band.
"For the fifth straight year inflation is low and stable - according to estimates of the Statistical Office, it was 2.0% on average throughout 2018," NBS said.
NBS, however, warned of potential risks related to global oil prices, protectionism in international trade and geopolitical risks, which could negatively affect investors' willingness to invest.
The central bank also noted that the net inflow of foreign direct investment reached 3 billion euro last year, continuing to comfortably cover the current account deficit, which has a positive impact on export growth and on reduction of external imbalances in the medium term.
NBS decision to keep the policy rate unchanged is in line with expectations, Erste Group analysts said.
"Growth remains vibrant, with anchored short- and medium-term inflation expectations and improving economic sentiment," Erste said in a note.
Erste analysts added they expect NBS to hold the policy rate unchanged for most of 2019, as the expected slowdown of economic growth in the Eurozone in 2019 "could impact ECB’s planned hike tempo, shaping prolonged period of lax local monetary policy."
NBS will hold its next rate-setting meeting on February 7.