Serbia: Key Policy Rate Raised to 11.5 Percent

After reviewing current economic developments at its meeting today, the NBS Executive Board voted to raise the key policy rate by 1 percentage point to 11.5 percent. In making this decision, the Executive Board took into account the need to contain inflationary pressures stirred up by the rise in agricultural product prices, regulated price growth and the effects of past depreciation of the dinar.

Y-o-y inflation exceeded the upper limit of the target tolerance band in October, and is likely to continue rising over the coming months. According to our estimates, it will run above the upper end of the target tolerance band in the first half of 2011, and then fall back to the target in the second half of the year.

The Executive Board decided to tighten the monetary policy stance judging that the 100 basis point increase in the key policy rate is needed to bring inflation back within the 4.5±1.5% target band by the end of next year (4±1.5% at end-2012).The next rate-setting meeting of the NBS Executive Board is scheduled for 13 January 2011.

News source: NBS link: article