Serbia’s central bank left its key policy rate at 3.0 percent and the executive board set the inflation target until 2021 at an unchanged 3.0 percent, plus/minus 1.5 percentage points.
The National Bank of Serbia (NBS), which has maintained its rate since wrapping up a 5-year easing cycle in April this year, said it was still cautious in the conduct of monetary policy due to the international environment while domestic inflationary pressures remain low amid the strongest economic growth in a decade.
Serbia’s inflation rate rose slightly to 2.2 percent in October from 2.1 percent in September but within the target range and is expected to remain stable, mainly reflecting a steady rise in demand.
Both the financial and corporate sectors expect price stability to be maintained, signaled by inflation expectations that are anchored around the 3.0 percent target one and two years ahead.
Serbia’s economy grew by an annual rate of 3.8 percent in the third quarter, down from 4.9 percent in the second quarter, with cumulative growth of 4.5 percent year-on-year in the first three quarters, the highest rate in the last 10 years, helped by past monetary easing, NBS said.
Between May 2013 and April this year NBS cut its key rate by 8.75 percentage points and economic activity has been boosted by double-digit growth in investments that will continue to spur manufacturing exports in the future.
There is also a continued net inflow of foreign direct investment, NBS said, helping comfortably cover the current account deficit and reducing external balances in the medium term, NBS said.
Serbia’s dinar has been relatively stable against the euro this year, helped by occasional purchases of euros to prevent it from rising. The NBS operates a managed float exchange rate regime.
The dinar was trading at 118.17 to the euro today, marginally firmer than 118.9 at the start of the year.
The National Bank of Serbia issued the following statement: