NBS: No change in key policy rate, monetary tightening continues

NEWS 10.03.202213:43 0 komentara
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The National Bank of Serbia (NBS) Executive Board kept the key policy rate unchanged at 1.0 percent and continued tightening monetary conditions using the flexibility of the monetary policy framework, by raising the weighted-average repo rate in reverse repo auctions and the percentage of excess dinar liquidity withdrawn in those auctions, the Bank said on Thursday.

In the last repo auction held this month, the weighted average repo rate amounted to 0.90 percent, close to the key policy rate and by 79 bp higher than in early October 2021 when the process of monetary tightening began, the Bank said on its website.

“In its monetary policy decision-making, the Executive Board had in mind that developments in the international environment call for special caution. The uncertainty that plagued the international commodity and financial markets in recent months due to the emergence of new coronavirus strains was additionally fuelled by geopolitical tensions and the crisis in Ukraine,” it added.

The Bank said that “this has pushed the prices of energy and global primary agricultural commodities and metals close to or even above their historical highs. The outlook for global economic growth is therefore increasingly uncertain, while an additional rise in the prices of energy, food and raw materials heightens the risk that inflationary pressures could turn out to be stronger than anticipated and present over a longer time period. In such circumstances, it remains uncertain at what pace the leading central banks, the Fed and the ECB, will normalise their monetary policies, nor what the effects of heightened uncertainty on financial conditions globally and on capital flows to emerging markets, Serbia included, will be.”

“As for developments in the domestic macroeconomic environment, the Executive Board states that the available monthly indicators suggest that economic activity in the beginning of the year is broadly in line with the NBS’s expectations. Growth continues to be led by services, construction and mining, while lower activity in the overall industry still mostly reflects the weaker production in the energy sector, and partly also lower manufacturing output due to persistent disruptions to global supply chains. The NBS retains its real GDP growth projection in the range of 4–5 percent for this year and in the medium term,” the statement added.

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