Central bank keeps key policy rate at 8.5 percent

The Executive Board of the National Bank of Serbia (NBS) decided on Thursday to retain its key policy rate at 8.5 percent.

Izvor: Tanjug

Thursday, 11.09.2014.

15:43

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Central bank keeps key policy rate at 8.5 percent

“In keeping the rate unchanged, the Executive Board was guided primarily by the still present uncertainties in the domestic and international environment,” the NBS said.

The NBS Executive Board said that geopolitical tensions and the U.S. Federal Reserve System’s reduced monetary accommodation could exert a significant impact on movements in the international money and capital markets, affecting in particular the emerging market economies.

"The current geopolitical tensions also dampen optimism in terms of the pace of recovery of the euro area and Serbia’s other important foreign trade partners,” the NBS said.

It said lower external demand would probably lead to weaker export results and to a somewhat higher foreign trade deficit than anticipated earlier.

The central bank’s Executive Board expects the adoption and implementation of the indispensable fiscal consolidation measures and structural reforms to have a positive effect on market expectations regarding the sustainability of Serbia’s public finance, and thus on the country risk premium.

“This would help moderate the risks which at this point warrant a cautious monetary policy,” the board said.

The Executive Board stated that year-on-year inflation was still below the lower bound of the target tolerance band of 4 percent plus or minus 1.5 percentage points.

According to an NBS projection, inflation should gradually decrease and return within the target tolerance band by the end of the year, supported primarily by the waning of the effects of the drop in prices of primary agricultural commodities and the anticipated revision of administered prices, notably electricity.

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