jorgovanka tabakovic : annual financial stability report for 2015 speech given by dr jorgovanka tabakovic, governor of the national bank of serbia at the presentation of the annual financial stability report for 2015, belgrade, 27 july 2016. * * * ladies and gentlemen, esteemed members of the press and fellow economists, welcome to the presentation of the annual financial stability report for 2015. if we call last year ’ s presentation of this report history or our firstborn, then today ’ s press conference can be regarded as the start of tradition and continuation of good international practice. macroprudential policy or the policy of safeguarding financial stability has been the focus of almost all economic discussions since the outbreak of the global financial crisis. the national bank of serbia does not lag behind other central banks in this respect. quite to the contrary, we are keeping up with them. the depth of our analyses and the expert approach place us among the most efficient central banks in terms of achieving the financial stability mandate. we have been witnesses to turbulences in the international environment for quite some time already. the ripple effects of these turbulences did not by - pass serbia as an open and small economy. however, we did not stand by and wring our hands, waiting to be hit by the waves of uncertainty from different continents. in coordination with the government of the republic of serbia, we responded with timely action, carefully assessing the intensity of all influences. through synchronisation of monetary easing and consistent fiscal consolidation, we have maintained price stability, reduced external and internal imbalances significantly and improved further the conditions for sustainable economic growth. as a result, the key policy rate is at its historical low since the introduction of the inflation targeting regime and the fiscal deficit is at its lowest level since 2008. i will take the liberty of saying that the monetary policy easing of the national bank of serbia has paved the way for a sharp drop in interest rates on dinar loans in the last three years. to put this into numbers – from may 2013 until today, the key policy rate was cut 17 times by a total of 7. 75 pp to 4 %. that the interest rate channel is working in the dinar segment of the market is confirmed by the concurrent decline in interest rates on dinar loans to households and corporates by almost 10 pp to the lowest levels on record. interest rates on government dinar securities also declined. since november 2014 we have also reduced the fx required reserve ratios

- standing challenge for statisticians. there is the challenge of appropriately capturing changes in quality and there is also the challenge of ensuring that the weights used to aggregate the prices of the various goods and services appropriately reflect households'expenditure patterns. for example, it may take some time for new goods and services to be included in the cpi basket. more generally, there is the issue of ensuring that the cpi appropriately takes account of changing expenditure patterns in response to movements in relative prices. the abs has recently begun updating its cpi weights to reflect changing household expenditure patterns on a more frequent basis, which should reduce the size of this ‘ substitution bias ’ in the future. http : / / www. rba. gov. au / speeches / 2018 / sp - dg - 2018 - 08 - 22. html 10 / 23 22 / 08 / 2018 low inflation | speeches | rba housing the cost of housing services has a large weight in the cpi, with the weight about equally split between the cost of building a new home and the cost of renting ( graph 8 ). there have been quite divergent dynamics in each of these two components in recent years. graph 8 new dwelling costs new dwelling cost inflation, which has an 8 per cent weight in the cpi basket, has tended to move closely with the residential building cycle over time ( graph 9 ). [ 6 ] however, despite the historically high level of activity in housing construction over recent years, new dwelling cost inflation has been running at a bit below its long - run average. during the late 2000s, new dwelling cost inflation was higher than it is currently because the residential construction sector was competing for materials and labour with the resources sector in the midst of its investment boom. this competition for inputs has clearly abated. wages growth in housing construction has been generally contained except for some particular skills such as bricklayers, in part because workers have been moving from the resources sector as projects there finished and also reflecting the general slow pace of wages growth in the economy. reports from liaison suggest that competition for inputs between public infrastructure projects and high - rise residential developments has put some upward pressure on new http : / / www. rba. gov. au / speeches / 2018 / sp - dg - 2018 - 08 - 22. html 11 / 23 22 / 08 / 2018 low inflation | speeches | rba dwelling cost inflation in sydney and melbourne. this includes competition for labour such as engineers and project managers, as well as competition for materials such as