After reviewing current economic trends, the Executive Board of the National Bank of Serbia (NBS) decided Monday to raise the reference interest rate from 11.5 to 12 percent.

The Board considered the fact that inflation exceeded the upper end of the target range and that further restrictions of monetary policy are needed in order to contain inflation pressures driven by the rise in regulated prices, inflation expectations, food prices and the price of oil on the world market, the NBS announced.

The Executive Board also took into account the fact that low aggregate demand will continue to drive deflation, especially considering that the growth of public sector salaries and pensions will be lower than expected.

By raising the reference interest rate, the central bank is striving to keep mid-term inflation within the bounds of the target inflation of 4.5 plus minus 1.5 percent at the end of 2011, and four plus minus 1.5 percent at the end of 2012.

The Executive Board will next review the reference interest rate at a session set for February 10.