Serbia's Central Bank Cuts Rate As Inflation Slows

(RTTNews) - Serbia's central bank decided to reduce its key interest rate by 50 basis points as inflation returned to the target range.

The Executive Board of the National Bank of Serbia on Friday decided to cut its benchmark rate to 10.50 percent from 11 percent. This was the first reduction in the rate since June this year.

Annual inflation dipped sharply to 4.9 percent in September from 7.3 percent a month ago. The rate has thus returned to the 2.5-5.5 percent target.

"The Executive Board judges that the key contribution to the inflation's return to the target came from monetary policy measures, the fall in primary agricultural commodity prices, relative stability of the dinar and low aggregate demand," the bank said in a statement.

Going forward, the bank said inflation is expected to remain within the target band. The decision to lower the rate was also guided by reduced risks associated with fiscal developments after the announcement of fiscal adjustment measures.

Low demand, together with the effects of fiscal consolidation measures, will serve as a strong disinflationary factor in the next year as well, it said.