Serbia's central bank seen keeping key rate at 3 percent this week - Reuters Poll

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BELGRADE (Reuters) - Serbia's central bank is expected to hold its benchmark interest rate, the highest in the region, at 3 percent this week, based on strong economic growth, a stable dinar currency and within target inflation, a Reuters poll showed.

All 13 analysts and traders polled this week and last forecast the central bank's executive board would leave borrowing costs unchanged on Thursday.

The bank also kept rates on hold last month citing low inflationary pressures and a rise in employment and foreign investments at home, as well as developments in financial and commodity markets abroad.

It last cut rates by 25 basis points in April 2018.

The International Monetary Fund on Monday praised Serbia's 2018 economic growth, which is seen at around 4.4 percent, the fastest in decade.

The lender also said Serbia's gross domestic product (GDP) would grow 3.5 percent this year as low base effects from 2017 and 2018 wane. According to a flash estimate, Serbia's economy grew 3.5 percent in the fourth quarter.

Inflation stood at 2 percent in December, firmly inside the central bank's target range of 3 percent, give or take 1.5 percentage points. January inflation data will be announced on Feb 22.

Analysts don't expect Serbia's central bank to raise borrowing costs any time soon as it remains cautious over the future rate policies of the U.S. Federal Reserve and the European Central Bank.

"Brexit uncertainties, FED and ECB policies and movements in global crude oil prices will likely influence the bank's decision to hold the rate," said Sasa Djogovic, a economist with the Belgrade-based Institute for Market Research.

Serbia relies on benchmark rates that are still the highest in the region to lure emerging market investors.

The dinar remained relatively stable in January and the first week of February, trading at between 118.3 and 118.5 to the euro, a preferred foreign currency.

A Reuters currency poll indicated it might weaken 0.6 percent to 119 to the euro in 2019.

(Reporting by Aleksandar Vasovic; Editing by Kirsten Donovan)

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