Projected 2008 inflation: 9.7 percent

The total inflation rate by the end of the year should be 9.7 percent, the National Bank of Serbia (NBS) said in its report on Tuesday.

Izvor: Tanjug

Wednesday, 19.11.2008.

09:18

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The total inflation rate by the end of the year should be 9.7 percent, the National Bank of Serbia (NBS) said in its report on Tuesday. The assessment is based on the assessed core inflation rate of 10.9 percent, the growth in regulated prices without oil derivatives of 10.7 percent, 8.2 percent growth in agricultural output and reduction of the price of oil derivatives by 0.3 percent. Projected 2008 inflation: 9.7 percent According to the NBS, the total inflation rate at the end of the third quarter of 2008 was 9.9 percent compared the end of the third quarter of 2007. Core inflation in the third quarter amounted to 10.2 percent against the same period last year and, by the end of the year, it should increase to about 10.9 percent, which is far above the upper limit of the targeted 3-6 percent. A drop in core inflation is expected after the second quarter next year and a return to the limits of the target towards the end of 2009, the NBS said. The maintenance or increase in the level of monetary policy restrictiveness in the short run is consistent with this assessment. The risks of the new assessment are high, because of the uncertainty brought about by the international financial crisis. The channels through which its impact on inflation can be expected are numerous—the foreign exchange rate, international and domestic demand, international inflation and international prices of raw materials. All these factors may significantly deviate from the assessment, depending on the volume and duration of the financial crisis, the NBS said. An opportunity to relax monetary policy will most likely appear next year in view of the fact that the de-inflationary effects of a drop in domestic and international demand, and a drop in the international inflation rate and prices of raw materials are expected in the coming period. If fiscal policy in Serbia is restrictive, there might be additional room for relaxing monetary policy. In the fourth quarter of this year, according to the central bank, the rate of core inflation growth will be about 2.8 percent. The prices of agricultural products are expected to increase by about 20 percent and their share in the total rise in retail prices is expected to be about 0.6 percentage points. As for regulated prices, their growth is expected to range between 1.2 and 1.6 percent.

Projected 2008 inflation: 9.7 percent

According to the NBS, the total inflation rate at the end of the third quarter of 2008 was 9.9 percent compared the end of the third quarter of 2007.

Core inflation in the third quarter amounted to 10.2 percent against the same period last year and, by the end of the year, it should increase to about 10.9 percent, which is far above the upper limit of the targeted 3-6 percent.

A drop in core inflation is expected after the second quarter next year and a return to the limits of the target towards the end of 2009, the NBS said.

The maintenance or increase in the level of monetary policy restrictiveness in the short run is consistent with this assessment. The risks of the new assessment are high, because of the uncertainty brought about by the international financial crisis.

The channels through which its impact on inflation can be expected are numerous—the foreign exchange rate, international and domestic demand, international inflation and international prices of raw materials.

All these factors may significantly deviate from the assessment, depending on the volume and duration of the financial crisis, the NBS said.

An opportunity to relax monetary policy will most likely appear next year in view of the fact that the de-inflationary effects of a drop in domestic and international demand, and a drop in the international inflation rate and prices of raw materials are expected in the coming period.

If fiscal policy in Serbia is restrictive, there might be additional room for relaxing monetary policy.

In the fourth quarter of this year, according to the central bank, the rate of core inflation growth will be about 2.8 percent.

The prices of agricultural products are expected to increase by about 20 percent and their share in the total rise in retail prices is expected to be about 0.6 percentage points. As for regulated prices, their growth is expected to range between 1.2 and 1.6 percent.

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