Central bank keeps key policy rate at 9.5 percent

Central bank keeps key policy rate at 9.5 percent

BELGRADE -- The National Bank of Serbia (NBS) Executive Board has decided to keep the key policy rate unchanged at 9.5 percent.

The Executive Board states that y-o-y inflation rate moves around the lower bound of the target tolerance band and that inflationary pressures have significantly abated, while inflation expectations are stable.

"In deciding to keep the key policy rate on hold, the Executive Board was guided by instability in international financial markets and heightened uncertainties surrounding the current geopolitical tensions," the board noted.

"This may reflect on Serbia through contracted capital inflows and higher prices in global commodities markets, notably prices of energy and primary agricultural commodities," according to the Executive Board.

"Besides, EU countries may experience lower economic growth, which would dampen the demand for our export products," said the board.

The expected stepping up of fiscal consolidation and structural reforms will contribute to stabilising inflation at low levels and preserving price and financial stability over the medium run, and will also reduce the exposure of the domestic economy to the above exogenous risks, the board remarked.

The NBS expects that the announced fiscal consolidation measures will open up the scope for monetary easing, which should have a positive effect on the sustainability of economic growth, the board pointed out.