(Adds bank's reasoning, context, dinar little changed)
BELGRADE, Sept 8 Serbia's central bank kept its
benchmark interest rate unchanged at 4 percent on Thursday,
taking a cautious approach in the face of persistent
uncertainties in international markets and with inflation rising
but relatively benign.
The bank last lowered the rate in
July, by 25 basis points. Leaving borrowing costs on hold last
month, it cited uncertainties abroad.
The bank said its decision had been motivated by the impact
of past cuts and future inflation expectations. It had also been
guided by continuing uncertainties in international commodity
and financial markets, which would affect future inflation and
capital flows towards emerging markets.
"A gradual rise in (domestic) aggregate demand and inflation
abroad, as well as the low base for oil prices will drive
inflation back into the target range in the first half of next
year," the monetary authority said in its statement.
In the shorter term, low costs for food production inputs
would slow inflation in the short term, it added.
Ten of 12 traders and analysts polled by Reuters
had said the bank would keep the rate at
4.0 percent, while two predicted a cut of 25 basis points.
Serbian inflation rose to 1.2 percent in July, up from 0.3
percent a month earlier, but it remains far short of the 2.5-5.5
percent corridor targeted by the bank although it is expected to
approach the lower end of that range by year-end.
The statistics office is scheduled to publish August
inflation data on Sept 12. The next rate-setting meeting is
scheduled for October 13.
Last week, the International Monetary Fund commended
Serbia's economic performance, but said the EU candidate country
should keep a lid on spending despite better-than-expected
deficit and growth figures, given the risky macroeconomic
environment and high public debt at 72.5 percent of GDP.
After a drop to historic lows immediately after Britain's
June 23 vote to leave the European Union, which sunsettled some
financial markets, the dinar rallied in August and early
That was due mainly to an inflow of euro remittances from
over a million Serbs working in the EU, as well as strong demand
and low market liquidity.
After the rate decision, the currency was trading between
123.20 and 123.40 dinars to the euro at 1015 GMT, almost
unchanged from its previous close.
(Reporting By Aleksandar Vasovic and Thomas Escritt Editing by