National Bank of Serbia Cuts Key Policy Rate to 1%

The key rate was cut by 25bps, which is now 1.25 p.p. lower than before the pandemic.

At its yesterday’s meeting, the NBS Executive Board decided to ease monetary policy further and cut once again the key policy rate by 25bps, to 1%. The National Bank of Serbia noted that by making such decision, the Executive Board is providing additional support to the domestic economy, having in mind the scale of the pandemic-induced crisis, renewed worsening of the epidemiological situation and economic slowdown globally, and especially in Europe.

After this cut, the key policy rate is by 1.25 p.p. lower than before the pandemic. The Executive Board expects that further monetary policy easing, coupled with the past robust response of the NBS and the Government, as well as the announced additional fiscal policy measures, will continue to exert a positive effect on the financing conditions for corporates and households and contribute to the rise in their disposable income.

At the same time, the NBS decided to narrow the main interest rate corridor, from ±1.0 p.p. to ±0.9 p.p. relative to the key policy rate, whereby the deposit facility rate was reduced by 15 bps, to 0.1%, and the lending facilities rate by 35 bps, to 1.9%.

The NBS now expects a GDP decrease of -1% compared to -1.5% initially estimated at the start of the pandemic. A better outcome is supported particularly by the faster than expected recovery of investment, mainly due to the preserved production capacities and employment in the pandemic conditions, the accelerated implementation of infrastructure projects and the secured more favourable financing conditions.

The country’s maintained positive medium-term outlook and the measures of the Government and the NBS are expected to support the recovery of domestic demand, which will, along with the further normalisation of external demand, lead to a more than full recovery of our economy next year and a GDP growth rate of around 6%.

The next rate-setting meeting will be held on 14 January 2021.

InterCapital
Published
Category : Flash News

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