NBS keeps key policy rate unchanged

BELGRADE - The National Bank of Serbia (NBS) Executive Board decided on Thursday to keep the key policy rate on hold at 5.75 pct and the deposit (4.5 pct) and lending facility (7.0 pct) rates remained unchanged as well.

"The prices of some food inputs in the global exchanges (cocoa and coffee) that recently reached their maximum levels, as well as the effects of the last year’s drought and reduced supply of fruit and vegetables, triggered accelerated y-o-y growth in domestic food prices over the past months. Due to high air temperatures, there is a risk that this year’s season could be below average as well, and the data released by the Statistical Office of the Republic of Serbia indicate that this year’s yields of some early fruit cultures are lower than last year," the NBS said in a statement.

"When making the decision, the Board noted that central banks worldwide, including the NBS, continue to face marked uncertainty regarding protectionist measures of leading world economies and their impact on inflation and economic growth. The conflict in the Middle East has flared up further, introducing a new risk dimension with regard to global prices of oil and natural gas, though these prices subsided once the truce was announced. In such uncertain global circumstances, there is high volatility in global commodity and financial markets, mandating caution in the conduct of monetary policy.

The Board also took into account the ECB’s continued accommodative stance in June, which should reflect on more favourable euro-indexed lending in Serbia, while the current announcements suggest that the Fed will be more cautious in monetary policy easing going forward. Such Fed’s decisions could be prompted by the emergence of heightened inflationary pressures due to additional tariffs imposed, which could also affect capital flows toward emerging economies," the central bank said.