(Adds detail, background, cbank's quarterly inflation report) By Gordana Filipovic
BELGRADE, Nov 19 (Reuters) - Serbia's central bank Governor Radovan Jelasic expressed confidence on Wednesday that its target of 6-10 percent inflation next year could be achieved, even though the dinar has hit 30-month lows.
The bank would spend hard currency reserves carefully to prop up the dinar, which has lost 11 percent this year, Jelasic told reporters on the sidelines of an economic forum.
"The inflation target remains on track, at 6-10 percent for 2009," he said. "But this exchange rate is certainly not making our life any easier."
The dinar has suffered most of its losses since the start of October, as investors dumped risky emerging market assets due to the global financial crisis, prompting a series of central bank interventions on the currency market.
On Tuesday the bank issued its quarterly inflation report, acknowledging that core inflation would still be in double digits at the end of 2008.
"We estimate that the three-month rate of core inflation in the last quarter will be somewhat higher than in the previous three-month period ... The year-on-year rate will continue to rise and will be 10.9 percent at the end of the year," it said.
Retail prices -- currently used to measure Serbia's headline inflation -- are seen up 9.7 percent at the end of December.
Headline inflation was 10.5 percent at the end of October, but core inflation -- which excludes state-controlled prices of goods and services -- was 10.7 percent, well above the bank's original 3-6 percent end-of-year target.
The report said high inflationary expectations and the exchange rate of the dinar would add pressure to inflation, while cheaper crude oil could lead to lower production costs.
On Wednesday, the dinar traded around 1.2 percent lower at 1410 GMT at 87.70/euro, close to its lowest since May 2006. On Tuesday, the bank sold 50 million euros in interbank market, wiping out the dinar's two percent decline.
"We have no crystal ball to tell what will happen to the dinar today, tomorrow or the day after, but based on monetary policy measures and the agreement with the IMF, we know that these create ground for greater medium and long-term stability," Jelasic said.
Serbia's $516 million stand-by deal with the International Monetary Fund, designed to help Serbia tighten its 2009 budget, has failed to impress currency markets. Traders say the deal will not resolve the problem of traditionally high seasonal demand for hard currency to pay for the imports.
Jelasic said the bank would continue currency interventions to ensure that market activity was smooth, but there will be no commitment to any particular dinar level except to prevent sharp daily swings.
"Our reserves are 9.2 billion euros and that means we are not lavishly spending them because we know we may need the money for some other purposes," he said. "But in the medium term, this situation, which is the result of psychological factors, not fundamentals, will stabilise."
End-October currency reserves stood at 9.34 billion euros. (Reporting by Gordana Filipovic; Editing by David Stamp)