Serbia’s central bank lowered its key policy rate by another 25 basis points to 3.0 percent to boost economic activity on faster-than-expected fall in inflation in the last three months.
It is the second consecutive rate cut by the National Bank of Serbia (NBS), which has now cut it by 50 basis points this year. The NBS has been in an monetary policy easing cycle since May 2013 and has cut the rate by a total of 875 basis points since then.
The NBS left its deposit rate unchanged at 1.75 percent, narrowing the interest rate corridor to 1.25 percentage points from 1.50 percent.
“The expected movement in inflation and its underlying factors going forward allow for further monetary policy easing,” NBS said, noting headline inflation in March eased to 1.4 percent from 1.5 percent in February and 1.9 percent in January.
Low inflationary pressures were also confirmed by core inflation, which fell to 0.8 percent, NBS said, adding inflation is projected to remain around the current level in coming months before coming closer to its midpoint in 2019, boosted by stronger domestic demand.
NBS targets inflation of 3.0 percent, plus/minus 1.5 percentage points.
Serbia’s Gross Domestic Product grew by an annual rate of 2.5 percent in the fourth quarter of last year, up from 2.1 percent in the third quarter.
Serbia’s dinar has been rising steadily against the euro in the last 12 months, with the NBS intervening on many occasions to curb its rise.
Today the dinar was trading at 118.14 to the euro, up 0.5 percent this year and up 4.1 percent since the start of 2017.
The National Bank of Serbia issued the following statement:
“At its meeting today, the NBS Executive Board decided to trim the key policy rate to 3%. At the same time, the decision was made to narrow the interest rate corridor from ±1.5 to ±1.25 percentage points, meaning that the deposit facility rate remains unchanged.
The next rate-setting meeting will be held on 10 May 2018.”
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