Key Policy Rate Kept on Hold
At its meeting today, the NBS Executive Board decided to keep the key policy rate at 4.0%.
In making the decision, the NBS Executive Board was guided by inflation factors, the effects of past monetary policy easing and the fact that inflation has been moving within the target tolerance band of 3.0%±1.5 pp since early 2017, where it is expected to stay in the period ahead.
Y-o-y inflation equalled 3.2% in February, largely reflecting one-off factors. Similarly to other countries, consumer price growth was driven by the recovery of global oil prices in the second half of 2016 and a higher than seasonally expected increase in fruit and vegetable prices caused by adverse weather conditions early this year. Core inflation of 1.7% y-o-y in January and February also reflects the persistently low inflationary pressures.
The NBS Executive Board will continue to closely monitor international developments which mandate caution, most notably with regard to movements in the international financial market and global oil prices. Monetary policies of the leading central banks are likely to diverge still further by the end of the year, thereby increasing the uncertainty regarding their impact on global capital flows. Nevertheless, the NBS Executive Board underlined that the resilience of the Serbian economy to adverse impacts from the international environment has increased owing to more favourable macroeconomic prospects, primarily lower fiscal and external imbalances at home.
The next rate-setting meeting will be held on 11 April 2017.