BELGRADE: Serbia's central bank is expected to keep its benchmark rate at 3.5 percent when its Executive Board meets on Thursday, a poll of dealers and traders showed, as the dinar currency remains strong and inflation is likely to rise later in the year.
Eight out of 12 analysts and traders polled by Reuters this week and last said the central bank would leave the rate unchanged. Four saw a 25-basis-point cut.
So far this year, the dinar has gained 0.5 percent against the euro while inflation fell to an annual 1.9 percent in January, down from 3 percent in December - still inside the central bank's target range of between 1.5 percent and 4.5 percent.
The bank said earlier it expects a mild rise of inflation in 2018.
The Statistics office is scheduled to release January inflation data on March 12.
Lower inflation also has a downbeat impact on Serbian government debt yields, Raiffeisen analyst Ljiljana Grubic said in a note. "We still maintain (our forecasts for) the key (Serbian central bank) rate intact at 3.5 percent year-on-year, but will closely look at inflation sentiment."
Other analysts believe the bank may introduce a minimal 25 basis points rate cut to boost lending, growth and to help weaken the dinar, which was bolstered by sales of state T-bonds and the amount of euros on offer on the interbank market.
To tame dinar gains, the central bank has so far sold 360 million euros in currency interventions on the local market.
Serbia's central bank may also decide to keep rates unchanged in anticipation of a rate increases by the US Federal Reserve this month. Such a move could affect investors' appetite for emerging markets including Serbia.
Last month, the bank said that inside-the-target inflation and volatile international markets were key factors that motivated it to hold the rate.
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