Tuesday, December 17, 2013

Serbia cuts rate 50 bps, policy aims at boosting inflation

    Serbia's central bank cut its policy rate by 50 basis points to 9.5 percent, citing below-target inflation, and said monetary policy would be geared towards raising inflation to the bank's 4.0 percent target.
    Serbia's inflation rate fell to 1.6 percent in November from 4.9 percent in October, below the Bank of Serbia's target range of 2.5-5.5 percent around a 4.0 percent midpoint.
    The Bank of Serbia has now cut rates five times since May by a total of 175 basis points.
    "Medium-term inflation is expected to move closer to the target, set at 4% until 2016, and monetary policy measures will be geared towards that end," the central bank said, adding that inflation expectations had now fallen to a historic low and markets expect inflation to move within the bank's target range in coming months.
    The bank attributed low inflation to the relative stability of the exchange rate along with sharp disinflation in food prices due to weak domestic demand.
    Serbia's Gross Domestic Product expanded by 0.3 percent in the third quarter from the second for annual growth of 3.2 percent, up sharply from the second quarter's 0.2 percent growth.
    Last month the central bank cut its 2014 growth forecast to 1.5 percent from a previous 2.5 percent due to the government's fiscal consolidation plans. Growth this year is forecast at 2 percent.


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