June 7, 2018 / 10:18 AM / in 4 months

UPDATE 1-Serbian central bank keeps benchmark rate at 3 pct - statement

(Adds central bank statement)

By Aleksandar Vasovic

BELGRADE, June 7 (Reuters) - Serbia’s central bank kept its benchmark rate at 3 percent on Thursday for the second straight month, given low inflation and country’s positive economic performance.

All 11 analysts and traders polled by Reuters this week and last said the central bank would leave the rate unchanged.

Serbia’s economy expanded by 4.6 percent in the first quarter and is expected to grow around 3.5 percent for the whole year.

Inflation in April fell to 1.1 percent, well below the central bank target corridor of 3 percent, give or take 1.5 percentage point. The Statistics Office will announce May inflation data on June 12.

In a statement, the bank said that low inflation and effects of monetary policy easing motivated it to hold the rate. “The inflation ... will gradually rise towards its target corridor, but it will remain closer to a lower end of (the bank’s) target range,” it said.

The bank said “uncertainties in international commodity markets still warrant cautiousness in monetary policies.”

“Uncertainties are also present due to changes in the prices of agricultural products in international markets ... and due to divergent policies of the U.S. Fed (Federal Reserves) and the ECB (European Central Bank),” the bank said.

So far in 2018 the Serbian dinar has rallied around 0.23 percent to the euro, prompting the central bank, which keeps it the dinar a managed float against the common currency, to buy over 1 billion euros on the local interbank market to prevent excessive gains.

After the rate decision, the dinar traded at 118.10 to the euro, or 0.1 percent weaker than the day earlier. (Reporting by Aleksandar Vasovic; Editing by Mark Heinrich;)

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