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Investing.com -- The National Bank of Serbia (NBS) kept its key interest rate unchanged at 5.75% at its June meeting, defying Bloomberg consensus expectations for a 25 basis point cut.
The decision comes as domestic inflation decreased to 3.8% year-over-year in May, and amid signs of weakened economic growth - factors that would typically support a rate reduction.
In its statement, the central bank emphasized that despite the declining inflation trend, a cautious monetary policy stance remains warranted due to elevated uncertainty linked to global trade policy and potential effects on inflation and economic growth.
The NBS indicated that if inflation develops according to forecasts and moves toward the mid-point of the target range in the coming months, monetary policy easing could resume. However, the bank noted that determining the exact timing is difficult given the current global environment.
Erste Bank (VIE:ERST) analysts project the NBS will deliver its first cut next month, as part of three total cuts expected in 2025. They cautioned that this forecast is "far from certain" as it depends heavily on the outcome of trade negotiations between the United States and European Union, as well as the upcoming Federal Reserve meeting and its messaging.
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