NBS keeps key policy rate at 4%

The Executive Board of the National Bank of Serbia decided at its meeting on December 8 to keep the key policy rate at 4%.

As the report states, the Executive Board expects inflation to remain low and stable, moving within the target tolerance band as of early 2017 (3% ± 1.5 pp). Inflation will enter the target tolerance band owing to the effects of past monetary policy easing, rising domestic demand, and the gradual recovery of global oil prices and inflation in the international environment, notably the euro area as Serbia’s most important foreign trade partner. In contrast, relatively low food production costs will continue to generate disinflationary pressures for some time yet.

Persisting uncertainties in the international financial and commodity markets also mandate caution in monetary policy conduct. As for the international financial market, the uncertainties pertain to the pace of the FED’s monetary policy normalization and the continuation of the ECB’s quantitative easing program as well as their impact on global flows of capital – the report adds.

However, the Executive Board underlined that successful implementation of fiscal consolidation and structural reforms, as well as the narrowing of external imbalances, were helping to improve the Serbian economy’s macroeconomic prospects and boost its resilience to negative shocks from abroad.

The next rate-setting meeting will be held on January 12, 2017.

Narodna banka Srbije Beograd

NBS

key policy rate

inflation

monetary policy

fiscal consolidation measures