Source: eKapija | Thursday, 10.11.2016.| 13:52
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Key policy rate kept at 4%

The Executive Board of the National Bank of Serbia decided at today's meeting to keep the key policy rate unchanged at 4%. In making the decision, the Executive Board took into consideration the inflation projection and the effects of past monetary easing on inflation movements in the period ahead, as well as the fact that the inflation target for 2017 has been revised to 3.% ± 1.5 percentage points on account of the substantial improvement in macroeconomic performances and prospects.

It is expected that year-on-year inflation will rise gradually in the coming months, return within the new target tolerance band early next year and move within the band thereafter, the NBS reported.

Such movements in inflation are anticipated based on the effects of past monetary easing and the recovery of demand at home, coupled with a gradual increase in global oil prices and inflation abroad. On the other hand, the disinflationary impact of a further drop in prices of primary agricultural commodities at home and abroad owing to a good agricultural season, and the resulting low food production costs, will continue to be felt for some time to come.

As highlighted by the Executive Board, monetary policy caution is mandated by uncertainties in the international financial market concerning future measures of the Fed and ECB, and their potential impact on global capital flows. However, successful implementation of fiscal consolidation and structural reforms, including the narrowing of external imbalances, increase the resilience of the domestic economy to potentially adverse effects from the international environment. This is confirmed by the IMF’s positive assessment following their October visit, a falling country risk premium and progress on international competitiveness rankings based on the improvement of the country’s business and investment climate.
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