Inflation: NBS retains its benchmark interest rate at 4%

The National Bank of Serbia has decided to keep the benchmark interest rate at the current level of 4% at the meeting of the Executive Board.

In making the decision, the Executive Board took into consideration that inflation was expected to return within the targetted tolerance band towards mid-2017, the report says.

The inflation trend, the NBS estimates, will be shaped by the effects of the past monetary easing and higher domestic demand, as well as by gradual recovery of the global oil prices and lower inflation abroad. 

On the other hand, the disinflationary impact of a further drop in prices of primary agricultural commodities and the resulting low food production costs, owing to a good agricultural season, will be felt for some time to come, the report adds.

The Executive Board advised caution in executing the monetary policy bearing in mind uncertainty on the international financial markets regarding future FED and ECB measures and their potential impact on global capital flows. 

However, the successful implementation of fiscal consolidation and structural reforms, as well as the reduction of external imbalances, have boosted the resilience of the domestic economy to potential adverse influences from the international environment. This is also confirmed by a sizable drop in the country’s risk premium to its nine-year low, the NBS notes.

(eKapija, 13.10.2016)

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