Serbia Central Bank holds Interest rates as cautious monetary policy warranted - Central Bank News

6th March 2014

Serbia's central bank maintained its policy rate at 9.5 percent, noting that inflation had now returned to the bank's target range in January but adding that caution was warranted in monetary policy due to "heightened volatility in international financial markets" that is dampening investor sentiment and may negatively influence capital flows.
    The Bank of Serbia (NBS), which intervened on foreign exchange markets on Monday after repeated interventions last month to support the dinar currency, also stressed the need for caution last month, saying the country was still in need for external financing despite rising exports.
    "By keeping the key policy rate on hold, the NBS aims to support price and financial stability in the medium term," the central bank said, adding that consistent implementation of fiscal consolidation measures should diminish the country's exposure to external risks and strained liquidity in global financial markets in connection with reduced asset purchases by the U.S. Federal Reserve.
     Further steps in reducing the country's foreign exposure and maintain economic stability and growth would come from the expected conclusion of an agreement with the International Monetary Fund, the central bank said.
    Talks between the IMF and Serbia's government started last month on a new agreement but the government needs to narrow its deficit further and save some 400 million euros.

    Serbia's inflation rate rose to 3.1 percent in January from 2.2 percent in December, returning to the central bank's target range of 2.5 percent to 5.5 percent, around a 4.0 percent midpoint.
   The central bank cut its rate by a net 175 basis points in 2013 as inflation slowed to a low of 1.6 percent in November. The bank expects inflation to rise in coming months due to higher administered prices and the one-off impact of higher value-added-tax on some goods in January.
    Serbia's economy pulled out of recession in 2011 and 2012, with Gross Domestic Product expanding by an annual rate of 2.6 percent in the fourth quarter of 2013.
    The bank, which has forecast growth of 1.5 percent in 2014, said manufacturing was growing in the beginning of this year, laying the foundation for growth this year that will be helped by a recovery of the euro area and the start of negotiations on accession to the European Union (EU)

Serbia holds rate as cautious monetary policy warranted - Central Bank News

Serbia holds rate, sees inflation back in tolerance band - Central Bank News

16th January 2014

Serbia's central bank held its policy rate steady at 9.50 percent, repeating that it expects inflation to return to the bank's tolerance range in the coming period and the bank is "determined to gear monetary policy at stabilizing inflation at that level on a long-term basis."
    "Though inflationary pressures and expectations have both lessened significantly, the Executive Board accentuated the need for a cautious monetary policy considering the risks emanating from movements in international financial markets, and in particular the Fed's decision on tapering the quantitative easing program," the Bank of Serbia said.
    On Tuesday, the central bank issued a statement saying a weakening of the dinar currency over the last three days did not indicate any "durable disturbances in the FX market" but rather an expected response by the currency to a seasonally higher demand for foreign exchange by local companies and the Fed's decision to start reducing its asset purchases from January.
    Last year the Serbian central bank cut its rate by a net 175 basis points as inflation slowed from 12.8 percent in January to a year-low of 1.6 percent in November. In December inflation rose to 2.2 percent but remains below the central bank's tolerance range of 2.5-5.5 percent around a 4.0 percent midpoint.
    The central bank said on Monday that the current undershooting is largely due to a 2.5 percent decline in food prices in 2013, shown by the fact that core inflation - which excludes food, energy, alcohol and cigarettes - was 4.2 percent in December. The main contributor to inflation last year was administered prices, which rose 10.4 percent.
    Inflation is expected to rise moderately in coming months toward the bank's target, driven by higher administered prices and a one-off impact of a rise in value-added-tax on some goods in January. Lower food production costs and weak demand will continue to have a disinflationary effect.
    In today's statement, the central bank said a consistent implementation of fiscal measures, together with the weak inflationary pressure, will help increase the country's resilience to external risks and aid the economic recovery.
    Serbia's dinar currency was resilient to pressure on emerging market currencies in the middle of 2013 after global investors started to withdraw funds in anticipation of the U.S. Federal Reserve's reduction in its asset purchases on improving growth prospects. Nevertheless, the central bank often expressed its concern over the consequences of a sudden capital outflow and was cautious in cutting rates.
    The dinar appreciated by 2.5 percent to the U.S. dollar in 2013, ending the year at 83.0 to the dollar, up from 85.13 at the end of 2012. But in the first few days of January, the dinar fell, triggering the central bank's statement on Tuesday. Today the dinar was trading around 84.90, down 2.2 percent.
    The central bank also repeated yesterday that it would intervene, both on the sale and purchase side of the foreign exchange markets when necessary to mitigate excessive volatility and ensure stability.
    Serbia's economy has been improving in recent months following two years of recession with Gross Domestic Product expanding by 1.4 percent in the third quarter from the second quarter for annual growth of 3.70 percent.
    The central bank forecasts growth of 1.5 percent this year and growth of 2 percent in 2013



Serbia holds rate, sees inflation back in tolerance band - Central Bank News

Serbia Central Bank holds rate due to international risks as inflation falls

Serbia's central bank held its key policy rate steady at 11.0 percent for the second month in a row, saying that the decision to maintain rates "was swayed by risk risks arising from the international environment" as inflationary pressures continue to subside.

    The National Bank of Serbia (NBS), which last cut its rate in June, confirmed that inflation is expected to return to the bank's target range by October and remain within the band thereafter. This expectation includes the impact of higher administered prices the rest of the year.
    Serbia's inflation rate eased to 8.6 percent in July from 9.8 percent in June, continuing a declining trend since October last year when when inflation hit 12.9 percent. In response to rising inflation in the second half of 2012, the NBS started raising rates but started cutting in May as inflation started to fall.
    In recent months, the central bank has said it expects inflation to return to its target range of 4.5 percent, plus/minus 1.5 percentage points in October.
    "The NBS executive board concluded that inflationary pressures have continued to subside on account of not only past monetary policy measures, but also largely due to reduced costs in food production as this year's agricultural season is much more favourable both globally and at home," the central bank said.

    Like many other emerging markets, Serbia has experienced an outflow of capital and currency depreciation since May and the central bank intervened several times in June to slow the decline.
    Since mid-June the Serbian dinar has continued to ease but the pace has been much more controlled. Since the beginning of the year, the dinar is down 2.7 percent against the euro, trading at 115.41 today.
    As last month, the central bank said the negative effects from international environment could largely be offset by consistent implementation of fiscal consolidation and structural reform by the government.
    "This would positively affect Serbia's investor perception and contribute to the narrowing of internal and external imbalances, lower inflation and sustainable economic growth," the bank said.
    Serbia's economy continued to slowly improve in the second quarter of this year, with Gross Domestic Product rising 0.7 percent year-on-year, down from 2.1 percent annual growth in the first quarter, but still much better than the contraction throughout 2012.
    The central bank said its assessment of the recovery was still positive, but gave no further details.
    Last month the central bank said in its quarterly report that it would consider lowering its benchmark interest rates if external risks ease and the government cuts spending.
    The central bank expects growth this year of 2.0 percent, but cut its 2014 growth forecast to 2.5 percent from an earlier forecast of 3.0 percent.

Serbia holds rate due to international risks as inflation falls - Central Bank News

for more details log on to National Bank of Serbia website : http://www.nbs.rs/internet/english/

Serbia Central Bank holds rate, still sees inflation in range in October

Serbia's central bank maintained its key policy rate at 11.0 percent due to the higher risk aversion of international investors and added that weakening inflationary pressures are expected to accelerate and inflation should return to the bank's target range by October.
    The National Bank of Serbia (NBS), which last cut its rate in June, said the decline in inflation is largely due to its policy measures and a stabilisation in the food market. Last month the NBS also said it expected inflation to return to its range of 4.5 percent, plus/minus 1.56 percentage points, by October.
    Serbia's inflation rate has been stable at 9.8 percent in June and May, down from a recent high of 12.9 percent in October last year.
    The central bank said the economic recovery that started late last year is continuing and it estimates that Serbia's economy will expand by 2 percent this year, led by rising exports. In the first quarter of this year the economy grew by 1.9 percent from the fourth for annual growth of 0.7 percent, down from 2.1 percent in the fourth quarter.

    But the bank's executive board also said additional fiscal consolidation and structural reforms will help ease inflationary pressures further, along with external imbalances, boosting the risk perception by international investors of Serbia.
    "However, given the higher risk aversion of international investors, prompted by the Fed's hint at downsizing of the quantitative easing programme, which spurred a rise in the country's risk premium and depreciation pressures in Serbia and almost all countries in the region, the Executive Board decided to keep the policy rate unchanged," the NBS said.
    Like other emerging markets, Serbia was hit by an outflow of funds in May and the central bank intervened in foreign exchange markets several times in June to slow the decline in the dinar. Since the beginning of July, the dinar has stabilized and is down only 1.5 percent agains the euro this year, trading around 113.98 to the euro today

Serbia holds rate, still sees inflation in range in October - Central Bank News

for more details log on to National Bank of Serbia website : http://www.nbs.rs/internet/english/

Serbia Central Bank leaves rate on hold as inflation continues to fall

Serbia's central bank left its key policy rate steady at 11.0 percent, saying inflation continues to decline due to lower demand and repeated that it should return to the central bank's target range by October.
    The National Bank of Serbia (NBS), which embarked on a monetary tightening campaign last year to hold down inflation before cutting rates by a total of 75 basis points in May and June, said a good agricultural season and global market prices should lower domestic food prices and a deceleration in credit activity and lower growth in wages "confirm that low aggregate demand will continue to be the key disinflationary factor in the period ahead."
    Serbia's inflation rate eased to 9.9 percent in May from 11.4 percent the previous month, continuing the decline since hitting a recent high of 12.9 percent in October last year. The central bank targets inflation of 4.0 percent, plus/minus 1.5 percentage points.
    Like other emerging markets, Serbia's markets have been hit by an outflow of funds from the Federal Reserve's plan to taper quantitative easing later this year, and the central bank last month intervened in foreign exchange markets several times to slow the decline in the dinar.

    From the beginning of May through July 9, the dinar has depreciated just over 3 percent against the euro, quoted at 114 to the euro earlier today.
    "Unfavourable movements in international financial markets have led to higher investor risk aversion, which has sparked an increase in risk premia and depreciation pressures almost throughout the  region," the central bank said.
    The central bank again appealed to the government to reduce its deficit further. Last month the government said it would cut spending to reduce this year's deficit to 4.6 percent of Gross Domestic Product after the International Monetary Fund warned is could reach 8 percent.
    "The Executive Board holds that the effects of additional fiscal consolidation measures and the implementation of structural reforms will contribute to further subsiding of inflationary pressures and aggregate demand and will help increase investor interest in the Serbian economy."

Serbia leaves rate on hold as inflation continues to fall - Central Bank News

For more details log on to National Bank of Serbia website : http://www.nbs.rs/internet/english/