The Executive Board of the National Bank of Serbia has decided in its meeting yesterday to keep the key policy rate at 11.75%.

The Executive Board estimates that the present degree of Serbia's monetary restrictiveness ensures, all other things unchanged, a return of inflation within the target tolerance band by the end of the year. Although year-on-year inflation is above the target, this estimate is underpinned by the low monthly rates of inflation during the last four months as a result of the monetary measures taken so far.

The Executive Board assesses that the decline in year-on-year inflation will also be supported by the consistent implementation of the fiscal consolidation programme, achievement of a precautionary arrangement with the IMF, expected stabilisation of agricultural prices, as well as implementation of the announced adjustments in administered prices.

The monetary policy measures taken so far acknowledge the strength and character of inflationary pressures and show strong commitment to bring inflation back within the target tolerance band. The Executive Board judges that besides NBS measures, a fall in inflation will also be aided by low aggregate demand, stable foreign exchange market, waning of the effects of one-off shocks like past food price increases, as well as by diminished pressures from the external environment.

The next rate-setting meeting of the Executive Board will be held on 11 April 2013. Source; NBS