Serbian central bank cuts key policy rate to 4 percent

Serbian central bank cuts key policy rate to 4 percent

"In the Board’s best collective judgement, this measure will contribute to further stabilization of interest rates in the interbank money market, gradual reduction of the spread between the weighted average repo rate and the key policy rate, as well as to the strengthening of transmission through the interest rate channel," a statement said, adding:

"The decision to lower the key policy rate is based on the assessment that low inflationary pressures will persist in the period ahead, notably those stemming from the majority of domestic factors. Sustained low inflationary pressures are also signalled by the further fall in inflation expectations of market participants. The implementation of fiscal consolidation measures and structural reforms continues. External imbalances have decreased, and are expected to continue down in the period ahead. Improved macroeconomic performances of the Serbian economy and its prospects were acknowledged in June by the IMF, as well as by Fitch Ratings which raised Serbia’s credit rating on 17 June."

The NBS Executive Board, further assessed that "elevated uncertainties in the international environment warrant caution in the conduct of monetary policy - this primarily relates to the impact of Brexit on international financial and commodity markets, i.e. on emerging economies, including Serbia. External risks are expected to be moderated not only by Serbia’s better macroeconomic performances, but also by the possible further monetary accommodation by the ECB and the Bank of England and slower than initially expected monetary tightening by the Fed."

The Executive Board concluded that, given the current circumstances, "the lowering of the key policy rate to four percent will ensure inflation’s return within the target tolerance band next year.!

The next rate-setting meeting will be held on August 11.