August 9, 2018 / 10:15 AM / a year ago

UPDATE 1-Serbian central bank keeps benchmark rate at 3 pct - statement

(Adds details, bank statement)

BELGRADE, Aug 9 (Reuters) - Serbia’s central bank kept its benchmark rate at 3 percent on Thursday, as inflation rose, the currency strengthened and the economy posted robust growth.

All 12 analysts and traders polled by Reuters this week and last said the central bank would leave borrowing costs unchanged.

According to a flash estimate, Serbia’s economy grew 4.4 percent in the second quarter, while total growth this year was expected at around 3.5 percent.

Inflation rose to 2.3 percent in June, up from 2.1 percent in May, but remained inside the central bank’s target corridor of 3 percent, give or take 1.5 percentage points.

In a statement, the bank’s Executive Board said it decided to keep the rate unchanged because of expected movements of inflation and effects of policy easing so far, adding that caution is also needed because of volatilities in international commodity and financial markets.

“Because of current rise in crude oil prices, an increase in inflation in international surroundings is expected. Also, normalisation of monetary policies of leading central banks ... could have negative implications on capital flows to emerging countries,” it said.

The bank added that global trade tensions and their effects on global economy also required caution.

Serbia’s currency, the dinar, has remained strong this year, bolstered by growth, investments and currency remittances from Serbians working abroad.

The central bank, which keeps the dinar in a managed float against the euro, has bought over 1.6 billion euros on the local interbank market to prevent it from making excessive gains.

After the rate decision, the dinar traded at 118.02 to the euro, almost the same as the day earlier. (Reporting by Aleksandar Vasovic; Editing by Larry King)

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