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Serbia Central Bank Ups Interest Rates
| 13 March 2008 |
Belgrade _Serbia's Central Bank decided Thursday to up its key benchmark interest rate by three points to 14.5%, a move prompted by economic instability amid political uncertainty.
The Central Bank’s Monetary Board that sets macroeconomic policies said that "the impact of non-economic and external influences was bolstered with (Serbia’s) aggravated macroeconomic performance."
The board said that the "further sharpening of monetary policy was inescapable” so the bank could maintain its efforts to secure its 3% to 6% target corridor for core inflation in 2008. Core inflation excludes volatile food and energy prices and it is used for setting monetary policies.
Annual headline inflation in February was 11.5 %, while annual core inflation was 5.6%.
The bank said the “hesitation of foreign investors is clear” and that “the domestic capital market is dwindling."
In the past 10 days, the Central Bank has intervened with some €45 million to preserve the currency market that almost ground to a halt amid political tensions in February and March.
"Inflationary expectations have surged and trading at the currency market fell” the statement said, warning that both issues are boosting depreciation pressures on the dinar.
On Thursday, Belex 15, the index of most liquid shares at the Belgrade Stock Exchange, dropped 4.79 % , a total of 19 % this week.
The Bank’s Vice-Governor Dijana Dragutinovic warned earlier the bank was intending to sharpen its macroeconomic measures to preserve price stability, the exchange rate and fend-off inflation after economic and political instability surged following Kosovo's independence and the collapse of the government earlier this week.
