Serbia's central bank held its policy rate steady at 8.5 percent, saying the current low rate of inflation is expected to return to its target range by the end of the year.
The National Bank of Serbia (NBS), which has cut its rate by 100 basis points this year, also said its decision to maintain rates "took into account the persistent uncertainties emanating from the international environment, which may negatively impact the country's risk premium and foreign capital flows."
The central bank said the risks of an increase in geopolitical tensions could also arise from slower than expected recovery in the euro area, but consistent implementation of fiscal measures by the government along with structural reforms could help lessen the external risks.
Serbia's inflation rate fell to 1.3 percent in June from 2.1 percent in May, the fourth month in a row of inflation that is below the central bank's lower bound of its tolerance range. The NBS targets inflation at a midpoint of 4.0 percent within a range of plus/minus 1.5 percentage points.
The NBS attributed the low inflation rate to low inflationary pressures that mainly reflect low demand, the continuing disinflationary impact from low agricultural commodities, the relative stability in the dinar's exchange range and inflation expectations.
At its meeting today, the central bank's executive board also approved its latest inflation report that will be presented on Aug. 13.