Central bank trims key policy rate to eight percent

Central bank trims key policy rate to eight percent

BELGRADE -- The National Bank of Serbia (NBS) decided to trim the key policy rate by half a percentage point, to eight percent, the Serbian central bank said on Thursday.

The NBS Executive Board was guided by the fact that y-o-y inflation has been moving below the lower bound of the target tolerance band since March and that it is likely to remain there in the coming period given that the majority of factors will maintain their disinflationary impact, says a statement from the NBS Governor's Office.

Such inflation movements can be put down to factors with a temporary effect, notably the unexpectedly low growth in administered prices and international and local prices of primary commodities.

The NBS Executive Board believes that the disinflationary pressures generated by factors with a lasting effect, such as aggregate demand, will be amplified still further by the cut in pensions and public sector wages.

The Board expects that the initiated implementation of fiscal consolidation measures and structural reforms will moderate the negative impact of external factors stemming from uncertainties over monetary policy moves of the world's major economies.

The NBS body judges that the expected conclusion of an arrangement with the IMF will provide an additional assurance of the credibility of Serbia's economic policy.

The Executive Board also adopted its November Inflation Report, which gives an overview of current macroeconomic developments and monetary policy measures. The report will be presented to the public on November 19.