Serbia: NBS keeps its policy rate unchanged in December

At its 11 December monetary policy meeting, the Executive Board of the National Bank of Serbia (NBS) decided to keep the reference rate unchanged at 4.50%. The rate is at its lowest level since the NBS introduced an inflation targeting mandate in 2006. The NBS cut its reference rate by 50 basis points at its meeting in October. The next monetary meeting is scheduled for 12 January.

In its brief accompanying statement, the NBS commented that inflationary pressures remain subdued reflecting low commodity prices, a low inflation environment abroad and a stable exchange rate. As a result, inflation remains below the lower band of the Central Bank’s target of 4.0% plus /minus 1.5 percentage points. The Bank commented that inflation will likely return within the target range in the second half of this year. Regarding the currency, the NBS expects it to remain broadly stable in the medium term due to the progress in fiscal consolidation and the narrowing of external imbalances, coupled with the favorable external funding conditions.

Met the why particular Consensus Forecast panelists expect the policy rate to end 2016 at 4.11%. For 2017, the panel sees the rate ending the year at 5.08%.