Bloomberg News

IMF Sees Room for Serbian Central Bank to Reduces Rates Further

October 03, 2011

Oct. 3 (Bloomberg) -- Serbia has room to cut interest rates more as inflationary pressures ease, the National Bank of Serbia said today, citing the International Monetary Fund.

Any loosening of monetary policy should be “gradual” and “cautious,” the Belgrade-based Narodna Banka Srbije said, citing an IMF press release of its latest report on the Balkan country.

“Reduced inflationary pressures may create room for further policy easing, but the National Bank of Serbia needs to remain vigilant to achieve its objective of bringing inflation back into its target band,” the IMF said.

The Washington-based lender’s board of directors confirmed on Sept. 30 a new 18-month precautionary loan program for Serbia, worth 1 billion euros ($1.33 billion).

The central bank cut its benchmark two-week repurchase rate half a point to 11.25 percent on Sept. 8 as inflationary pressures eased and concern shifted to weakening growth outlook.

The bank targets an inflation rate of 4.5 percent plus or minus 1.5 percentage points at the end of 2011 and 4 percent plus or minus 1.5 percentage points at the end of 2012.

This month’s Serbian survey compiled by Bloomberg shows inflationary expectations have subsided, with analysts seeing inflation in October next year at 7 percent, a full percentage point below their forecast for September 2012.

--Editor: James M. Gomez

To contact the reporter on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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