Thursday, September 6, 2012

Serbia holds rate as change has little inflation impact

    The central bank of Serbia kept its policy rate unchanged at 10.50 percent, saying a change to its tight policy stance right now would have little effect on the inflation rate.
    The National Bank of Serbia said inflation was being driven by higher domestic and international food prices caused by a bad harvest, an expected rise in administered and import prices and the waning effect of past depreciation of the dinar currency.
   "The Executive Board decided to maintain the degree of monetary restrictiveness because the impact of changes in the key policy rate on the factors spurring current inflation growth would be rather limited," the central bank said in a statement.
    Serbia's inflation rate was 6.1 percent in July, above the bank's target of 4.0 percent, plus/minus 1.5 percentage points. 

    The National Bank expects positive results from efforts to cut the government deficit, income-generating measures only having a one-off effect on inflation while lower spending would dampen demand and ease inflationary and exchange rate pressures.
     "The Executive Board notes that the degree of monetary policy restrictiveness in the coming period will depend on the impact of external factors, success in containing inflation expectations and the effects of fiscal consolidation," the bank said.


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