National Bank of Serbia Keeps 11.75% Interest Rate Level

April 11, 2013

Serbia’s one-week repo rate was lifted eight times between June 2012 and February 2013 against the backdrop of a sharp acceleration of inflation from less than 3% a year ago to a double-digit crest in the first quarter of this year.  The eight central bank interest rate increases took such from 9.50% to 11.75% level.  The rate was left unchanged at meetings in March and today.  Some analysts were expecting a cut this month, and a statement released today observed “abated inflationary pressures and the nascent economic recovery led by increased exports.”  But the statement also spoke of a need for fiscal consolidation, and the presumed main reason for not easing policy now was the failure to reach a political accord with Kosovo, which likely will delay Serbia’s entry into the euro area.  Serbia needs capital inflows. Monetary officials are hopeful that inflation will end the year back within the 2.5-5.5% target corridor.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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