Serbia’s central bank cuts key policy rate to 3%

Serbia’s central bank cuts key policy rate to 3%
By bne IntelliNews April 13, 2018

The National Bank of Serbia (NBS) executive board decided to cut the key policy rate again on April 12 to 3%. The bank previously cut the rate to 3.25% on March 14, after keeping it stable at 3.5% for four consecutive months. 

The NBS said that by lowering the key policy rate amid low inflationary pressures, it will provide additional support to credit activity and economic growth.

The bank said that at the same time, the decision was made to narrow the interest rate corridor from ±1.5pp to ±1.25pp, meaning that the deposit facility rate remains unchanged.

“In making such a decision, the executive board assessed that the expected movement in inflation and its underlying factors going forward allow for further monetary policy easing,” reads the statement.

According to the NBS, the slowdown in inflation in the past three months was stronger than expected while in March, year-on-year inflation equalled 1.4%, indicating a further reduction in inflationary pressures. That inflationary pressures are low is also confirmed by movements in core inflation, which decelerated to 0.8% y/y in March, its lowest level since inflation has been measured by the consumer price index.

As highlighted by the executive board, under the projection, inflation will stay around the current level in the coming months. It is expected to come closer to the midpoint during 2019, also on account of growth in domestic demand.

Previously, on October 9, the board cut the key policy rate to 3.5% from 3.75% in September. For the previous 13 months, the rate had remained at 4%.

The next rate-setting meeting of the NBS executive board will be held on May 10.

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