BELGRADE: Serbia's central bank unexpectedly cut its benchmark interest rate by 25 basis points to 3 percent on Thursday, reacting to a strong dinar currency and low inflation.
Ten of 11 analysts and traders polled by Reuters had forecast unchanged rates while one expected a cut of 25 basis points.
So far this year the dinar has gained about 0.2 percent against the euro. Inflation in March fell slightly to 1.4 percent from 1.5 percent in February, just below the bank's target of between 1.5 percent and 4.5 percent, Statistics Office data showed on Thursday.
"The rate cut will support credit activity and boost growth," the bank said in a statement.
Last month Serbia confirmed its interest in a new deal with the International Monetary Fund focused on reforms to boost economic growth.
To contain gains in the dinar, which Serbia keeps in a managed float against the euro, the central bank has this year bought 620 million euros ($764.3 million) and sold 180 million euros in currency interventions on the local market.
After the rate decision, the dinar traded at 118.30 to the euro, 0.1 percent down from Wednesday's close.
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