Serbia Cuts Interest Rate For First Time In Over A Year

Serbia's central bank slashed its key interest rate in July for the first time in over a year to support economic growth as policymakers expect inflationary pressures to remain low this year and next.

The Executive Board assessed that conditions have been met to cut the key policy rate by 25 basis points to 2.75 percent, its new lowest level in the inflation targeting regime, the National Bank of Serbia said in a statement on Thursday.

The latest reduction in the interest rate was the first since March 2018, when the rate was cut by a quarter-point.

Headline inflation eased to 2.2 percent in May and policymakers expect it to remain within the target tolerance band, mostly in its lower part, this year and next.

Stable core inflation and below-target financial and corporate sector inflation expectations suggest subdued inflationary pressures, the bank said.

"The Executive Board stressed that the Serbian economy's resilience to potential negative effects from the international environment has increased owing to the narrowing of internal and external imbalances and favorable macroeconomic prospects going forward," the bank said.

Further, the NBS expects growth to be led by domestic demand this year and foreign direct investment to result in a gradual narrowing of external imbalances as they help to boost production and export capacities.

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