Inflation, volatile dinar, to keep Serbian interest rate on hold - Reuters poll
BELGRADE (Reuters) - Serbia's central bank is expected to keep its benchmark rate unchanged this week for the fourth straight month due to modest inflation, a volatile dinar and uncertainties in global markets, a Reuters poll showed.
Last year the bank cut rates by a total 350 basis points to a record low 4.5 percent. In January it also kept the rate unchanged, citing uncertainties on international markets, especially the United States and China.
Further policy easing is also unlikely after the U.S. Federal Reserve raised interest rates for the first time in nearly a decade. That could slow down placements in riskier emerging markets including Serbia's, the poll showed.
Of 18 dealers and analysts polled by Reuters , 15 expected the bank to keep rates on hold when it meets on Thursday. Three saw a 25 basis point cut.
"Potential effects of a rate cut on the dinar's exchange rate to the euro could be bigger than on borrowing costs, therefore we believe that the central bank will keep the rate unchanged this month," Srdjan Tomasevic, a director in charge of trading with the Serbian arm of Erste bank, said in an email.
China's economic slowdown and weak oil prices suggest "a rate cut may be expected in the future, but the central bank will not make further moves before it sees reactions of the Fed and the European Central Bank," he said.
While Serbian inflation is far below the 2.5 to 5.5 percent target band, it rose in December to 1.5 percent, from 1.3 percent a month earlier. The Statistics Office is due to announce January inflation data on Feb. 23.
The dinar has lost around 0.8 percent versus the euro so far this year, mainly due to external pressures and a weak interbank market, prompting the central bank to sell 290 million euros ($325 million) to bolster the domestic currency.
The dinar rallied this week before planned sales of dinar-denominated state debt and the bank on Monday purchased 10 million euros to stem excessive gains.
Serbia holds snap elections this spring and the ruling Serbian Progressive Party (SNS) is seen as a front runner.
Although the vote will probably put a brake on the economy as businesses defer investment pending the outcome, it is unlikely to affect Serbia's 1.2 billion euro ($1.3 billion) standby loan deal with the International Monetary Fund (IMF) or its progress towards European Union accession.
($1 = 0.8864 euros)
(Reporting by Aleksandar Vasovic; Editing by Ruth Pitchford)
