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Serb cbank hikes key rate by 300 bps to 14.5%

Serbia’s central bank on Thursday raised its key policy rate by 300 basis points to 14.5%, for the third time this year, in a fresh effort to prop up the dinar, its key tool in fighting inflation.

“It is inevitable to immediately additionally increase the level of monetary policy restrictiveness so that core inflation falls within a 3-6% targeted by the end of the year,” the bank said after its monetary board meeting. Reasons to tighten were “non-economic and external amid deteriorating macroeconomic performance”, the bank said and added that the risk premium was on the rise, foreign investment was on hold, inflationary expectations were getting stronger, exerting additional depreciation pressures on the dinar.

The bank raised the two-week repo rate twice in February by a total of 150 basis points to 11.5% after both core and headline inflation overshoot official targets. Core inflation hit 6.5% in February and headline inflation rose to 11.3% -- nearly double what the government had planned for the year. (Reuters)