NBS key policy rate kept on hold at 6.5 pct

BELGRADE - The National Bank of Serbia (NBS) Executive Board decided on Thursday to keep the key policy rate on hold at 6.50 pct and the rates on deposit (5.25 pct) and lending (7.75 pct) facilities were also kept unchanged.

"The Board’s decision to keep the key policy rate on hold for the ninth consecutive month was motivated by the declining, though still elevated global inflationary pressures, the current medium-term inflation projection, and global uncertainty over energy and primary commodity prices," the NBS said in a statement.

"The Board also took into account the past hikes in the key policy rate and required reserve ratios, and the continued impact of their effects on inflation.

The pass-through of hitherto monetary tightening on interest rates in the money, lending and savings market, and a fall in inflation expectations, signal the efficiency of the monetary policy transmission mechanism.

Furthermore, global inflation continues to slow, with the risks as to its further movement being increasingly balanced.

In light of the subsiding inflationary pressures and the effects of restrictive monetary conditions, many central banks are projecting with increasing certainty that inflation in their countries will return within the target band in H2 2024 or H1 2025.

Caution in the euro area and the USA is still mandated by core inflation, which continues to move above headline inflation, mainly due to higher wages.

This is why the ECB and the Fed are cautious as to the start of the monetary easing cycle.

The NBS Executive Board judges that caution in domestic monetary policy conduct is needed also due to rising global oil prices after the OPEC+ countries extended supply curbs to Q2, in an environment of elevated geopolitical tensions, longer transport routes and higher logistical costs," the central bank also said.