NBS raises key policy rate to 6 pct

BELGRADE - The National Bank of Serbia (NBS) Executive Board on Thursday raised the key policy rate by 25 bp to 6 pct, the NBS said in a statement.

The rates on deposit and lending facilities were raised to 4.75 pct and 7.25 pct, respectively.

"In making the decision, the Board judged that further moderate tightening of monetary conditions is necessary to preclude a rise in inflation expectations and ensure that inflation hits a downward trajectory and returns within the target tolerance band over the projection horizon.

The pass-through of key policy rate hikes so far to the interest rates in the markets of money, loans and savings signals the efficiency of the monetary policy transmission mechanism through the interest rate channel.

At the same time, by maintaining relative stability of the dinar exchange rate against the euro, the NBS significantly contributes to containing the effects of the spillover of rising import prices onto domestic prices, and to overall macroeconomic stability amid heightened global uncertainty," the central bank's statement said.

"A further decline in energy prices, resolution of global supply bottlenecks and a reduction in container transport costs largely contributed to the easing of cost-push pressures globally, which should slow inflation at home. Uncertainty over global growth and concerns over recession in advanced economies resulted in a further decline in primary commodity prices. Still, the Board underlines that monetary policy caution is needed due to the persisting geopolitical tensions over the Ukraine conflict, and the fact that the indirect effects of elevated prices of energy and industrial raw materials in the past period, along with the labour market, are still keeping core inflation at a relatively high level in most countries, which reflects on imported inflation in Serbia," it also said.