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Serb central bank raises key rate <RS2WTS=NBYA> to 10.75 pct

BELGRADE, Oct 9 (Reuters) - Serbia's central bank increasedits benchmark interest rate by 25 basis points to10.75 percent on Tuesday, reflecting concerns over risinginflation and debt.

"Considering that the increase of food prices andstate-controlled prices is higher than expected and thatinflationary expectations are on the rise, the Executive Boardhas decided to increase the benchmark rate to prevent thespillover ... to other prices," the bank said in a statement.

Serb inflation in August rose to 7.9 percent, up from 6.1percent in July after retail prices increased this month,following the government's efforts to finance its 2011 6.2budget gap through a hike in value-added tax.

(Reporting by Aleksandar Vasovic; Editing by Catherine Evans)

((aleksandar.vasovic@thomsonreuters.com)(+381113044930))

Keywords: SERBIA RATES/

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