Thursday, September 8, 2011

National Bank of Serbia Cuts Rate 50bps to 11.25%

The National Bank of Serbia cut its 2-week repo rate by 50 basis points to 11.25% from 11.75% previously as global financial market and economic conditions created uncertainty.  The Bank said: "The decision on further relaxation of monetary policy was adopted to ensure that inflation returns to the target, without major volatility. The Executive Board expects that inflation will continue to decline until the end of the year and that it will enter the target tolerance band in the first half of the next year. Future path of the key policy rate will depend on the materialisation of risks, primarily in the international environment, and those relating to fiscal policy at home."

The Bank had paused in August, after the Bank reduced the 2-week repo rate by 25 basis points to 11.75% at its July meeting, and cutting the rate 50 basis points at its June meeting to 12.00%.  Serbia reported inflation of 12.1% in July, down from 12.7% in June, 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 "The deepening of global economic problems remains a possibility. Concluding a precautionary arrangement with the IMF will help ease possible implications regarding the risks in some advanced economies and currency zones."  The Bank next meets on the 6th of October.


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