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2017-08-10 12:00:22.0

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 and the new medium-term inflation projection.

Uncertainties still prevail in the international commodity and financial markets. This pertains to movements in the global prices of primary commodities, notably oil.  As for the international financial market, uncertainties are still fuelled mainly by the divergent monetary policies of the leading central banks – the Fed and ECB, which may impact capital flows to emerging economies.

Since the start of the year, inflation has been moving within the target tolerance band. Its movement in the second quarter confirms that early in 2017 it was led by the price growth of a smaller number of products and services. Low and stable core inflation of around 2% y-o-y and the inflation expectations of the financial sector and corporates, which are within the target both one and two years ahead, also suggest that inflationary pressures are still low.

The NBS Executive Board expects inflation to remain within the tolerance band of 3.0%±1.5 pp in the period ahead. The high base from the prices of petroleum products will exert a drag on inflation while, as of early 2018, this year’s one-off price hikes of certain products and services will drop out of the y-o-y comparison pushing inflation below the current level. A gradual increase in the global prices of primary agricultural commodities and aggregate demand in Serbia will work in the opposite direction. 

At today’s meeting, the NBS Executive Board adopted the August Inflation Report, which will be presented to the public on Wednesday, 16 August, when monetary policy decisions and the underlying macroeconomic developments will be discussed in more detail.

The next rate-setting meeting will be held on 7 September.

Governor’s Office