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Serbian central bank maintains key rate

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Serbian central bank maintains key rate

The National Bank of Serbia decided to maintain its key policy rate at 3.5%, citing better economic performance in the third quarter and expected effects of past monetary policy easing.

Inflationary pressures remain subdued as evidenced by the slowdown in year-over-year headline and core inflation in recent months. Lower dinar-denominated import prices are also weighing on inflation. The central bank projects inflation to move within the target tolerance band of 3.0 plus or minus 1.5% then move below the target midway through the first half of 2018.

GDP growth rose to 2.1% year over year in the third quarter, buoyed by a pick-up in manufacturing activity. The service sectors also expanded during the quarter at an accelerated pace.

Monetary policy easing in September and October passed through to interest rates on new dinar loans, which declined by 0.3 percentage point in the household segment and by 0.4 percentage point in the corporate segment in October.