Unchanged Serbian Monetary Policy Rate

October 16, 2014

The Executive Board of the National Bank of Serbia left monetary policy on pause.  The benchmark interests rate had been cut by 225 basis points over the final two-thirds of 2013 but by a further 50 basis points each in May and June of this year to 8.5%.  But a released statement after this month’s meeting again stressed financial market risks that argue for caution:

In keeping the rate unchanged, the Executive Board was guided primarily by the still present uncertainties in the domestic and international environment. Geopolitical tensions and the Fed’s reduced monetary accommodation can exert a significant impact on movements in the international money and capital markets, affecting in particular the emerging market economies. The current geopolitical tensions also dampen optimism in terms of the pace of recovery of the euro area and Serbia’s other important foreign trade partners. Lower external demand would probably lead to weaker export results and to a somewhat higher foreign trade deficit than anticipated earlier.   

Similar to the previous statement, officials note that Serbian inflation is currently running below the 2.5-5.5% target range but likely to stay within those boundaries next year.  The next policy meeting is scheduled for November 13.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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