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Serbia central bank keeps key rate at 3.0%

The National Bank of Serbia decided to keep its key rate unchanged at 3.0% after loosening its policy in March and April due to a slowdown in inflation.

The central bank projects inflation to remain close to the lower bound of its target band through the end of 2018, and approach the target midpoint of 3.0% in the second half of 2019.

Given those expectations, the central bank's decision to keep its interest rate unchanged was largely due to oil price uncertainties, as well as the "diverging policies" of the bank's U.S. and EU counterparts, said ING economist Valentin Tataru in a note.

"We believe that the window of opportunity for policy easing is getting narrower, as inflation has probably bottomed in April and should follow a slower upward trend going forward," Tataru said. "An eventual rate cut at the next couple [of] meeting[s] could be on the table if the currency strengthens significantly, as the inflation outlook alone doesn't seem to be convincing enough for the NBS."