NBS keeps key policy rate at eight percent

BELGRADE - The Executive Board of the National Bank of Serbia (NBS) decided Thursday to keep its key policy rate at the present level of eight percent, the central bank said in a release.

In making the decision, the Executive Board was guided by the fact that y-o-y inflation is still moving below the lower bound of the target tolerance band, the NBS said.

However, while dented aggregate demand and low inflation in the international environment generate disinflationary pressures in the long run, the falling prices of primary agricultural commodities and unadjusted administered prices have a temporary disinflationary effect and have made the strongest influence on the movement of inflation below the lower bound of the target of four percent, plus or minus 1.5 percentage points.

The Executive Board judges that the monetary policy measures undertaken so far, gradual waning of disinflationary effects of low food production costs, and the expected administered price adjustment will contribute to inflation's return within the target band by mid-2015.

Furthermore, the Executive Board is aware of persistent uncertainties coming from the international environment associated with the impact of geopolitical factors, monetary policy moves of the world's leading economies, as well as the pace of economic recovery of our major trade partners.

The Executive Board expects that fiscal consolidation envisaged by the 2015 budget will mitigate the negative impact of risks emanating from the international environment and have a positive bearing on the country's risk premium, which will all contribute to keeping inflation low and stable.

The next rate-setting meeting of the Executive Board is scheduled for 15 January 2015...