UPDATE 1 - Serbia's c-bank holds key repo rate at 4%

When taking this decision, the NBS board has kept in mind inflationary factors and the new medium-term inflation projection, NBS said in a statement.

The inflation rate will remain within the target band of 1.5%-4.5% in the short term, the Serbian central bank said.

The one-off effects of the hikes in the prices of certain products and services will disappear as of early 2018, dragging inflation below the current level. On the other hand, a gradual increase in the global prices of primary agricultural commodities and demand in Serbia will support inflation, NBS noted.

Serbia’s consumer prices rose by 3.6% year-on-year in June following an annual increase of 3.5% in May, according to the latest official data available. On a monthly comparison basis, consumer prices grew by 0.2% in June, after falling 0.5% in May.

Uncertainties in the international financial markets stem largely from the prices of primary commodities and the diverging monetary policies of the leading central banks, the Fed and the ECB, which may impact global capital flows to emerging economies, NBS pointed out.

NBS last changed the repo rate in July 2016, cutting it by 0.25 percentage points to help guide inflation to the target band.

The NBS will hold its next rate-setting meeting on September 7.