Thursday, August 11, 2011

Serbian Central Bank Holds Repo Rate at 11.75%

The National Bank of Serbia held its 2-week repo rate unchanged at 11.75% as global financial market turmoil created uncertainty.  The Bank said: "In line with the Executive Board's earlier judgements, inflation is on a declining path. The main factors behind its decline are the drop in food prices, occasioned by a good agricultural season, and low aggregate demand. The fall in y-o-y inflation rates over the coming period should lead to a drop in inflation expectations, which will provide additional impetus to the disinflation process."

In its July meeting the Bank reduced the 2-week repo rate by 25 basis points to 11.75%, after cutting the rate 50 basis points at its June meeting to 12.00%.  Serbia reported inflation of 12.7% in June, down from 13.4% in May, 14.7% in April, and above the bank's inflation target range of 3-6%.  On global developments the Bank said "given potential implications regarding risks in some developed countries and currency zones, as well as possible fiscal risks at home, the Executive Board decided to keep the key policy rate on hold for the time being".

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