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Serbia keeps key rate on hold

Serbia's central bank kept its key policy rate on hold at 3.0%, saying currently low inflation is expected to gradually move toward the target.

The National Bank of Serbia said it expects inflation to rise to its 3% target in the second half of 2019, while staying close to the lower bound by the end of 2018. Inflation hit a low for the year of 1.1% year over year in April.

The company targets 3% growth in prices, plus or minus 1.5 percentage points.

Serbia's GDP grew by 4.6% in the first quarter and is expected to expand around 3.5% for 2018, Reuters reported.

The central bank said uncertainties in the international commodity market, primarily mounting oil prices since mid-2017, warrant caution. However, oil prices are expected to stabilize by the end of the year and decline in 2019.

"Caution is still needed because of the diverging policies of the Federal Reserve System and the European Central Bank, and uncertainty in terms of the pace of their normalization going forward," the central bank said. "Uncertainties in international markets are also fueled by geopolitical tensions."

"Nevertheless, the Executive Board points out that the resilience of our economy to potential negative effects from the international environment has increased, owing to improved macroeconomic trends and a more favorable outlook for the period ahead."