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10.03.2011.

Key Policy Rate Raised to 12.25 Percent

After reviewing current economic developments in its meeting today, the NBS Executive Board voted to raise the key policy rate by 25 basis points to 12.25 percent.

The rise in agricultural product prices, at home and worldwide, and the resulting cost pressure on processed food prices is currently the key generator of inflationary pressures. Global oil and base metal prices are also on the rise. The impact of growth in import prices on inflation has been eased over the last three months by the strengthening of the dinar, prompted by the drop in Serbia’s risk premium and by the effects of monetary policy measures.

In the first months of 2011, consumer price growth will also be spurred by the rise in regulated prices, notably prices of electricity, utilities and city transport service. 

On the other hand, given the still relatively modest recovery of economic activity and soaring unemployment figures, demand will continue to produce disinflationary pressures despite the lifting of the freeze on public sector wages and pensions in early 2011. Further, the full effect of past monetary policy measures is yet to materialise in the coming period.

In view of the above, by raising the key policy rate by 25 basis points the NBS aims to bring medium-term inflation within the set targets (4.5±1.5% for end-2011 and 4±1.5% for end-2012).

The next rate-setting meeting of the NBS Executive Board will take place on 7 April 2011.

Governor’s Office