Serbia: August Inflation Report summary
Overview:
The August Inflation Report shows a significant upward revision to the National Bank of Serbia’s (NBS) inflation projection. While inflation is currently below target it is expected to climb significantly by the end of the year. It should stay within the inflation target band but move within the upper end of it. Aggregate demand remains soft although the economy is showing signs of recovery. The worsening inflation picture comes largely from higher food prices due to adverse weather conditions and a faster than expected depreciation of the dinar. The NBS has already responded by hiking rates by 50 bps and may well have to do so again to keep rising inflation expectations in check. While medium-term inflation pressures remain muted next year’s target is also rather more challenging than this year’s.