Serbia's central bank (NBS) left its one-week repo rate unchanged at 11.75% on Thursday, April 11, for a second consecutive month citing subdued inflation which will likely return within the bank’s target band of 2.5-5.5% by end-2013, the NBS stated. The bank underscored its efficient monetary measures saying that monthly inflation has remained low over the past four months.

The on-hold rate decision was expected as the NBS recently said it might alter its monetary policy stance as inflationary pressures stemming from food and regulated prices eased. Serb policy makers also pledged a more accommodative monetary policy in order to stimulate growth. Since June 2012, the NBS has increased its key repo rate eight times by 225 basis points. The monetary policy tightening, seeking to cut inflation, has, however, weighed on the real sector borrowing costs and growth prospects as the Serbian economy struggles to recover after contracting 1.7% in 2012.

The NBS said that further monetary easing will depend on the results from fiscal consolidation as well as on global financial markets and growth outlook of Serbia’s main trade partners.

Serbia’s annual inflation eased to 12.4% in February from 12.8% the month before due to slower food and transport price growth. The onset of the new agricultural season will likely help lower food prices further over the coming months. The statistics office will publish data on the CPI in March on Friday, April 12.

The next rate-setting meeting of the NBS’ Executive Board will be held on May 13.