NBS decides to keep key policy rate at 5.75 pct

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

"When making the decision, the Executive Board took into account the fact that several factors together triggered accelerated growth in domestic prices of food, especially non-processed food, over the past months. This refers primarily to prices of some food inputs in the global market and adverse weather conditions so far in the year, together with depleted inventories of agricultural commodities from the previous year due to the last year’s drought. Petroleum product prices also increased in June, as the global oil price went up after the outbreak of the Middle East conflict," the NBS said in a statement.

"Mostly as a result of the above factors, headline y-o-y inflation in Serbia stepped up to 4.6 pct in June, after slowing to 3.8 pct in May. The NBS estimates that y-o-y inflation could continue moving around the upper bound of the target band (3±1.5 pct) until the end of the year and slow gradually in 2026. In explaining its decision, the Executive Board emphasised that caution is necessary in monetary policy conduct. Though less intense, uncertainty in the international environment remains pronounced. This primarily pertains to future trade policies of leading world economies and geopolitical tensions. Though some countries reached tariff agreements with the USA, numerous issues still surround their implementation. Following declaration of ceasefire in the Middle East, the global prices of oil and natural gas went down. However, geopolitical tensions still pose a significant upside risk in this respect. The stance of leading central banks, the ECB and the Fed, was also cautious and they did not change their rates," it said.