Central Bank of Serbia Cuts Repo Rate 25bps to 9.50%

The National Bank of Serbia cut its 2-week repo rate by another 25 basis points to 9.50% from 9.75% previously.  The Bank said: "Inflation stayed on a downward path, ending 2011 somewhat lower than expected by the National Bank of Serbia, mainly due to the one-off effect of methodological changes in the calculation of fruit and vegetable prices. Inflation is expected to continue down and possibly undershoot the target tolerance band at the end of the first quarter. A part of this fall will be short-lived, resulting from the above methodological changes and other effects such as that of the administrative cap on trade margins and the so-called base effect of high monthly inflation rates recorded in the same period last year. This taken into account, inflation is expected to stabilise around the target in the third quarter of the year."

The Bank also cut the interest rate by 75 basis points in December and November, 50bps in October, and 50bps in September, after pausing in August, while previously the Bank reduced the 2-week repo rate by 25 basis points to 11.75% at its July meeting, and cutting the rate 50 basis points at its June meeting to 12.00%.  Serbia reported inflation of 7% in December, down from 8.7% in October, 10.5% in August, 12.1% in July, 12.7% in June, 13.4% in May, 14.7% in April, and just above the bank's inflation target range of 3-6%.  

The IMF is forecasting 2011 GDP growth in Serbia of 2%, and 3% in 2012.  The Bank next meets on the 9th of February 2012.  The Serbian Dinar (RSD) last traded around 81.5 against the US dollar.

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