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 and lending facility rates unchanged at 4.5 pct and 7.0 pct, respectively, the NBS said in a statement.

"In making this decision, the Executive Board primarily took into account actual and expected inflation, as well as risks from the international environment that could affect its trajectory," the central bank said.

"Y-o-y inflation continued to move within the target band (3±1.5 pct), and has been below the target midpoint again since June. In July, it stood at 1.9 pct, primarily owing to lower food prices, particularly those of fruit and vegetables, which, due to an exceptionally good new harvest, were 18% lower than in July last year. Against this background, and given the absence of any significant second-round effects thus far and the greater-than-expected resilience of our economy to the energy shock, the NBS August projection envisages inflation being lower this year than projected three months ago and remaining within the target band throughout the projection horizon, i.e. over the next two years. Moreover, bearing in mind the low base from last year due to the application of the decree capping trade margins, as well as the effects of rising global prices of energy and other primary commodities, we expect inflation to move around 4% from September this year, and remain there during 2027 as well, thereafter gradually declining towards the end of the projection horizon. As for y-o-y core inflation (measured by the change in the CPI excluding food, energy, alcohol and cigarettes), its intensity and structure have not changed significantly since September last year, and it is moving around the upper bound of the 4.5% target, which was also its level in July this year," it also said.