NBS keeps key policy rate at 5.75 pct

BELGRADE - The National Bank of Serbia (NBS) Executive Board decided on Thursday to keep the key policy rate at 5.75 pct, and also kept the deposit facility (4.5 pct) and lending facility (7.0 pct) rates unchanged, the central bank announced.

"The Board made the decision primarily in view of actual and expected inflation, as well as factors from the domestic and international environment affecting its movements. After inflation dropped to 2.9 pct and 2.8 pct y-o-y in September and October, respectively, the Board expects it to continue trending around the target midpoint until March 2026, i.e. as long as the Decree on Special Conditions for Trade in Certain Types of Goods – which caps wholesale and retail trade margins - is in force," a NBS statement said.

"Inflation is anticipated to continue moving within the 3±1.5 pct target tolerance band even after the expiry of the Decree, until end-2026 and in the medium run. This should be facilitated by the announced adoption of systemic laws that will curb unfair merchant practices, as well as by the easing of cost-push pressures from the international environment, and the onset of a new agricultural season, assuming that it turns out better than this year’s. The increase in disposable income and the low base from September this year will work in the opposite direction. However, we do not anticipate significant inflationary pressures stemming from the rise in disposable income as wage growth is expected to be matched by corresponding gains in productivity. Furthermore, the NBS’s measures to stimulate lending to lower-income citizens are carefully calibrated to avoid excessive credit growth, which could otherwise pose risks to both price and financial stability," it also said.