Serb central bank governor wants to wait on rates

By Daniel Bases

WASHINGTON (Reuters) - Serbian central bank chief Radovan Jelasic said on Sunday he would like to have more time for the latest interest rate increase to work through the financial system before taking further monetary action.

The bank raised interest rates a whopping 3 percentage points in one shot last month, lifting the benchmark interest rate to 14.5 percent in an attempt to prop up its currency, the dinar.

"We decided to have a stronger increase immediately instead of going by a step-by-step approach," Jelasic said in an interview with Reuters conducted on the sidelines of the spring meetings of the International Monetary Fund and World Bank.

"I can only talk for myself. My personal opinion is that after this substantial increase we need to provide some time to the market to adjust to this increase, first of all, before we take the next step," he said.

Jelasic said parliamentary and local elections on May 11 were overpowering, to a degree, the interest rate decision.

Current headline inflation as measured according to European Union standards is 12.5 percent, while official headline inflation was lower at 11.8 percent.

Jelasic reiterated that he thought the core rate of inflation, which stood at 7 percent in March, would fall back into its target range between 3 percent and 6 percent by the end of the year.

"In May of last year we didn't know about food, fuel, and elections. But I mean we definitely have to make sure we deliver on our promises regarding inflation targets," he said.