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BELGRADE (Reuters) - Serbia's central bank increased its benchmark interest rate by 25 basis points to 10.75 percent on Tuesday, reflecting concerns over rising inflation and debt.
"Considering that the increase of food prices and state-controlled prices is higher than expected and that inflationary expectations are on the rise, the Executive Board has decided to increase the benchmark rate to prevent the spillover ... to other prices," the bank said in a statement.
Serb inflation in August rose to 7.9 percent, up from 6.1 percent in July after retail prices increased this month, following the government's efforts to finance its 2011 6.2 budget gap through a hike in value-added tax.
Reporting by Aleksandar Vasovic; Editing by Catherine Evans