Serbian inflation amounted to 1.2 pct m-o-m in May and stood at 10.4 pct y-o-y, according to figures released by the National Bank of Serbia (NBS).

In a statement, the central bank said this was mostly in line with the expectations stated in its May Inflation Report.

“Similarly to price movements in the previous months, monthly inflation growth was mostly affected by the prices of processed food, products and services within core inflation, and energy prices.

Monthly rise in processed food prices equalled 2.3 pct in May, which is a slightly bigger increase relative to their dynamics since the start of the year.

The acceleration was mostly driven by robust growth in the global prices of primary agricultural commodities, energy and other industrial raw materials with a significant share in the formation of retail prices of processed food (paper, cardboard and plastic containers, transport costs).

Y-o-y, processed food prices in May were 13.5 pct higher. In contrast, for the first time since the beginning of the year, unprocessed food prices recorded a monthly fall of 0.6 pct in May, driven by the seasonally usual drop in the prices of fresh vegetables of 7.1 pct. In y-o-y terms, unprocessed food prices slowed their growth to 21.1 pct compared to 24.6 pct from April.

M-o-m, energy prices in May edged up 2.1 pct, largely on the back of global factors, notably rise in global oil prices, which spilled over onto the prices of petroleum products at home, pushing them up 3.7 pct in May.

For the second straight month, monthly growth of prices within core inflation (CPI excluding food, energy, alcohol and cigarettes) equalled 1.0 pct in May, which could be indicative of a somewhat stronger spillover of cost-push pressures relative to Q1.

Still, in contrast to some Central and Southeast European countries, y-o-y core inflation, which can be affected by monetary policy measures to a larger extent, continued to be significantly lower than headline and amounted to 6.3 pct in May, supported by the relative stability of the exchange rate that has been maintained even in these extremely uncertain global conditions.

Another important factor contributing to low and stable core inflation are the anchored medium-term inflation expectations of the financial sector, which have been within the target tolerance band.

Additionally, the Serbian Government’s decision enabling companies to purchase electricity under conditions more favourable than market ones until end-August 2022, as well as the decision on capping the prices of some food staples, will continue to contribute to alleviation of inflationary pressures,” the NBS said.

“Under our latest forecasts from the May Inflation Report, with the arrival of the new agricultural season (assuming we do not have last year’s drought again), after peaking in June and/or July, inflation should be on the downward path for the remainder of the year.

Inflation will most likely return to within the bounds of inflation target of 3±1.5 pct in the second half of the year, and then continue to slow down until the end of the projection horizon,” the central bank noted.