Serbia's central bank said on Thursday it had raised its key interest rate by 0.25 percentage points to 11.5 percent as annual inflation rose to more than double the target rate.
"In December, inflation continued to rise and reached 12.2 percent," the National Bank of Serbia (NBS)said in a statement.
The NBS forecast for 2012 was 5.5 percent at the annual level.
Inflation is expected to decrease in the second quarter of 2013 ant to fits within the target rate of 5.5 percent by the end of the year, the statement said.
The government had forecast the Balkan country's economy would contract by 1.5 percent in 2012, while at the beginning of the year it projected a 1.5-percent growth.