Serbias central bank unexpectedly raised interest rates for a second time this year as it battles to bring Europes second highest inflation rate within its target band.
The Narodna Banka Srbije boosted the one-week repurchase rate by a quarter-point to 11.75 %, its eighth increase in nine meetings. Serbian rate-setters are running counter to other authorities in eastern Europe, where borrowing costs are falling to halt economic slowdowns amid the debt crisis. The central bank is trying to slow inflation to its target band of 2.5% to 5.5% this year after prices jumped 12.2% in 2012.
"The NBS is certainly winning the battle in terms of trying to show which central bank in the region is the most hawkish," says Tim Ash of Standard Chartered. "I sense herein the NBS is still struggling a bit with the credibility gap after recent changes at the top, and wants to prove that it is fully independent, and to do whatever it takes to break the back of inflation and the still wide current account deficit. I, like most of the street, did not really expect this move. Perhaps also the NBS is eager to send a signal to politicians that now is not the time for early elections."
Source: bne