NBS key policy rate kept on hold

BELGRADE - The National Bank of Serbia (NBS) Executive Board decided on Thursday to keep the key policy rate on hold at 6.50 pct.

The deposit (5.25 pct) and lending facilities (7.75 pct) also remained unchanged.

"The Board’s decision to keep the key policy rate unchanged for an eighth month in a row was motivated by receding, though still elevated global inflationary pressures and the current medium-term inflation projection according to which inflation is expected to retreat to within the NBS target band in mid-2024.

The Board also took into account the past increases in the key policy and required reserve rates, whose effects will continue to spill over to inflation.

The pass-through of past monetary tightening on interest rates in the markets of money, loans and savings, and the fall in one-year-ahead financial and corporate sector inflation expectations signal the efficiency of the monetary policy transmission mechanism," the NBS said in a statement.

"Moreover, global inflation continues to slow and approach pre-pandemic levels, reflecting the subsiding of cost-push pressures, the easing of global supply bottlenecks, and the effects of past monetary tightening by central banks.

Although transportation and other logistics costs went up due to geopolitical tensions and issues surrounding shipping through the Red Sea, this has so far had no major impact on global prices of oil, other energy and primary commodities, or on inflation of our main tradе partners, partly also because of subdued global demand.

The NBS Executive Board nonetheless maintains that pronounced geopolitical tensions mandate caution in monetary policy decision making.

In addition, further global fragmentation may trigger significant losses in global production, including negative effects for our key trade partners.

In such conditions, expectations have receded that leading central banks, the Fed and the ECB, might start easing their monetary policies even before mid-year," the central bank also said.