Serbia's central bank expected to keep main rate at 2.75pc

The Serbian central bank is expected to leave its benchmark rate unchanged at 2.75pc this week, after cutting it by 25 basis points in July, as the currency remains strong, growth on track, and inflation low, a Reuters poll showed.

Eleven out of 12 analysts and traders surveyed said the bank would leave the rate unchanged when they meet on Thursday. One foresaw another 25-basis-point cut.

Last month, the bank unexpectedly cut the rate to bolster lending and growth, the first such move since April 2018.

It said that the slowdown of global growth and inflation, slower- than- expected policy tightening by the US Federal Reserve and the European Central Bank, as well as international trade disputes were factors in reducing the rate.

The Serbian economy grew 2.5pc in the first quarter of 2019, and according to estimates by the International Monetary Fund, the central bank and the government, it is set to grow 3.5pc this year, down from 4.4pc in 2018.

Serbia's inflation fell to 1.5pc in June from 2.2pc in May and remains at the bottom threshold of central bank's target of 3pc, give or take 1.5 percentage points. The statistics office will announce July inflation data on August 12.

In an analysis, the Eurobank said that central bank's monetary policy "would most probably remain accommodative and growthsupportive with further interventions on the FX market … to tame dinar's strength."

"An additional cut within the next three to five months would not come as a surprise, as most of the global concerns … will remain in the driver's seat regarding where markets' attention will be drawn," it said.

The dinar, bolstered by remittances from Serbs living in the European Union, investments and purchases of euro- denominated treasury bonds, has been strong against the euro since April.

The central bank, which keeps the currency in a managed float, has so far this year purchased over 1.7 billion euros ($1.90 billion) to stem its gains on the currency market.