Central bank's key policy rate remains at 8.5 percent

The key policy rate will remain at the level of 8.5 percent, the National Bank of Serbia (NBS) Executive Board decided on Thursday.

Izvor: Tanjug

Friday, 11.07.2014.

09:23

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Central bank's key policy rate remains at 8.5 percent

The rate was kept on hold "though year-on-year inflation rate is currently moving around the lower bound of the target and inflationary pressures are rather low as a result of low aggregate demand (main medium-term disinflationary factor), stable exchange rate and anchored inflation expectations," a statement said.

The Executive Board pointed to negative effects of the recent floods on economic stability, especially in the sectors of energy, mining and agriculture, contributing to lower-than-expected growth prospects for 2014.

For the same reason, the balance of payments trends will be less favorable than anticipated. However, subsidized loans, flood damage repair works and the expected speeding up of South Stream project implementation are likely to boost the economic activity, the release states.

The flood damage restoration will have a one-off impact on government expenditures, but we expect the government to remain committed to the implementation of fiscal consolidation measures and structural reforms, NBS underscores.

When making the decision to keep the key policy rate unchanged, the Board had in mind the “still present, though less pronounced, risks relating to liquidity levels in the international capital markets,” the NBS Executive Board states.

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