UPDATE 1 - Serbia's c-bank holds key repo rate at 2.25%

In making this decision, the central bank was guided by the inflation outlook and macroeconomic indicators from the domestic and international environment, NBS said in a statement following a rate-setting meeting. 

The inflation is likely to move around the lower bound of the 1.5%-4.5% target band until mid-2020, the central bank said.

"Thereafter, under the impact of rising aggregate demand, inflation is expected to gradually approach the midpoint, reaching it in the medium run." 

Serbia's average consumer prices rose by 1.0% year-on-year in October, after growing by 1.1% in September, official statistics show. On a monthly comparison basis, Serbia's consumer price index (CPI) grew by 0.1% in October, after falling by 0.5% in September, according to figures published by the national statistical office.

NBS also said it remains cautious in its monetary policy, as the monetary policies of leading central banks may impact capital flows to emerging economies. Movements in the prices of oil and primary agricultural commodities are also uncertain, given the intricate impact of numerous factors on demand and supply, the NBS said.

However, the resilience of the Serbian economy to a potential negative impact from the international environment has increased, owing to the full coordination of economic policy measures, which resulted in lower internal and external imbalances, favourable macroeconomic prospects and an adequate level of FX reserves, NBS estimated.

The central bank cut the key repo rate by 0.25 of a percentage point to 2.25% in November to help guide inflation to the target band.

The NBS will hold its next rate-setting meeting on January 9.