National Bank of Serbia unexpectedly cuts key interest rate

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Photo by Bobica10/Shutterstock.com

The National Bank of Serbia ( Narodna Banka Srbije or NBS) lowered its key policy rate by 25 basis points to a record-low of 2.25% at its most recent meeting, surprising markets who expected no change. 

National Bank of Serbia building main entrance in Belgrade. Photo by Bobica10/Shutterstock.com

Speaking on November 7, policymakers said inflationary pressures weakened and added that the decision was also influenced by developments in the international environment, namely the slowdown in global trade and economic growth and Federal Reserve and European Central Bank policies.

Still, the NBS noted that resilience to possible negative impacts from the international environment strengthened, local media including Serbian state news agency Tanjug and SeeNews report.

In September, annual inflation rate fell to 1.1%, its lowest since April 2018 and below the central bank’s target of 3% (plus or minus 1.5%). Policymakers expect inflation by the end of 2019 and in the first half of 2020 to be around the lower limit of the tolerance band. 

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