Serbian central bank NBS makes decision about key policy rate

Photo: Nikola Andjic

The National Bank of Serbia, NBS, Executive Board decided to keep the key policy rate at 6.50%. The rates on deposit (5.25%) and lending (7.75%) facilities were also kept unchanged.

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"The Board's decision was motivated primarily by the medium-term inflation projection and the expected movement of key inflation factors, and by the still elevated, though subsiding, global inflationary pressures, and heightened uncertainty over the global prices of energy and other primary commodities," the central bank announced, adding:

"Moreover, the effects of past monetary tightening have largely spilled over to the cost and volume of private sector borrowing, while financing conditions have stabilized since the key policy rate was raised last time, in July 2023."

When it comes to inflation, the Executive Board underlined that year-on-year inflation in Serbia continues to slow down, even faster than expected, and that it measured 5% in March.

"Core inflation also lost further pace, under the impact of past monetary tightening, and became equal to the headline rate in March. The inflation slowdown reflects the lower food price growth and a further decline in one-year ahead inflation expectations of the financial and corporate sectors," the NBS stated.

"It should be noted that as of the beginning of this year short-term expectations of the financial sector are within the NBS target band as well. The Executive Board expects that inflation will recede further and return within the target band probably this May, which is somewhat earlier compared to the medium-term projection released in February," according to the bank.

A statement added that the Board today also adopted the May Inflation Report with the latest macroeconomic projections that will be presented to the public in more detail at a press conference on May 14, along with additional explanations of monetary policy decisions.

The next rate-setting meeting will be held on June 13.

(Telegraf Biznis)