Central bank increases reference interest rate

BELGRADE The Executive Board of the National Bank of Serbia (NBS) decided on Thursday to increase the reference interest rate from 11.25 to 11.50 percent. Following a one-month lapse, year-on-year inflation continued to rise in December, reaching 12.2 percent, which is above the upper bound of the target tolerance band. Central bank increases reference interest rate Core inflation was also relatively high, measuring 8.2 percent in December. In addition, the earlier announced revisions of administered prices are yet to take place. The response of monetary authorities aims to prevent the spillover of the effects of growth in administered prices to other prices through the inflation expectations channel. The NBS measures will also make sure that increased dinar liquidity does not give rise to inflationary pressures and stress in the foreign exchange market, the central bank said. Along the measures of the monetary policy, the Executive Board also expects that the fiscal consolidation programme will yield more tangible results and give a full contribution to the lowering of the year-on-year inflation rate. In the coming period, the strongest disinflationary effects will be coming from low aggregate demand, and a new agricultural season kicks may bring about a positive impact on inflation movements from food prices. According to the National Bank of Serbia's projection, year-on-year inflation should fall from the second quarter onwards and return within the target band by the end of 2013. The next rate-setting meeting of the Executive Board will be held on February 7. Tanjug

Central bank increases reference interest rate

Core inflation was also relatively high, measuring 8.2 percent in December. In addition, the earlier announced revisions of administered prices are yet to take place.

The response of monetary authorities aims to prevent the spillover of the effects of growth in administered prices to other prices through the inflation expectations channel. The NBS measures will also make sure that increased dinar liquidity does not give rise to inflationary pressures and stress in the foreign exchange market, the central bank said.

Along the measures of the monetary policy, the Executive Board also expects that the fiscal consolidation programme will yield more tangible results and give a full contribution to the lowering of the year-on-year inflation rate.

In the coming period, the strongest disinflationary effects will be coming from low aggregate demand, and a new agricultural season kicks may bring about a positive impact on inflation movements from food prices.

According to the National Bank of Serbia's projection, year-on-year inflation should fall from the second quarter onwards and return within the target band by the end of 2013.

The next rate-setting meeting of the Executive Board will be held on February 7.