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The central bank’s Monetary Council kept the bank’s key rate on hold at 0.90% at a monthly policy meeting. The Council also left the O/N central bank deposit rate at -0.05%.  The Council has left the base rate on hold since signalling an end to an easing cycle at a policy meeting in the spring of 2016. At the previous policy meeting, the Council raised the O/N deposit rate by 10bp, marking the first policy tightening in years. In a statement released after the meeting, the Council reiterated guidance issued after the monthly policy meeting in March.

The Council said inflation “will fluctuate around” the 3% central bank target in the coming quarters, while the measure of core inflation excluding indirect tax effects  — a bellwether indicator of underlying inflation — is “expected to continue to rise until the autumn months and then to decline from the end of 2019”. The Council noted that “persistently buoyant” domestic demand is boosting the pace of price increases, while weakening external activity is restraining that pace, and said it would assess the effects of this “dichotomy” on the maintenance of price stability over the 5-8 quarter horizon of monetary policy. “The monetary policy stance will continue to be accommodative, economic agents’ financing costs will remain favourable,” the Council said.