Serbia's central bank raised its key interest rate by 0.20 percentage points to 10.95 percent on Thursday, after inflation figures soared to almost double the target rate.
"The annual level of inflation continues to rise... and is still above the top limit of target range," the National Bank of Serbia (NBS) said in a statement.
Serbia's target range for 2012 inflation is up to 5.5 percent. The NBS said the annual level of inflation in September was at 10.3 percent.
According to Serbia's independent Economy Institute the inflation rate for the 2012 is likely to reach 14 percent. A government forecast last month put the expected annual inflation at 9.1 percent.
Increased food prices "as a consequence of a bad farming season" and an overall price hike following the increase of value added tax (VAT), which rose from 18 to 20 percent in October, caused the rise in inflation, the national bank said.
Serbia revised its economic growth forecast downwards from 1.5 percent to an expected contraction of 0.5 percent for this year.ks/sb/hd