January 11 (SeeNews) - Serbia's central bank, NBS, said on Thursday it will keep its key repo rate unchanged at 3.5%.
"In making such decision, the Executive Board had in mind the expected movement in inflation and its factors in the coming period, and the expected effects of past monetary policy easing," the central bank said in a statement.
The inflation rate will remain within the target band of 1.5%-4.5% in the short term. Inflation is likely to stand in the lower part of the target band in the first half of 2018, due to the low price base of petroleum products and other products which recorded one-off hikes in early 2017. The expected rise in domestic demand will work in the opposite direction, NBS noted.
Serbia's annual consumer price inflation stood at 2.8% in November, the same as in October, according to the latest official data available. On a monthly comparison basis, Serbia's consumer price index (CPI) remained unchanged in November after increasing by 0.2% in October
Uncertainties in the international financial markets stem largely from the diverging monetary policies of the leading central banks, the Fed and ECB, which may impact capital flows to emerging economies, including Serbia. In addition, there is uncertainty around the global prices of primary commodities, especially oil, which recorded growth in the previous months, NBS noted.
However, the resilience of the Serbian economy to potential negative impact from the international environment has increased, owing to the strengthening of the macroeconomic fundamentals, the NBS said.
The central bank cut the repo rate by 0.25 of a percentage point to 3.75% in September and lowered it further to 3.5% in October to help guide inflation to the target band.
The NBS will hold its next rate-setting meeting on February 8.