Soskic Sees Serbian October Inflation Rate Falling Below 9%

Serbia’s inflation rate will fall below 9 percent in October and may reach the central bank’s target in the first quarter of 2012, Governor Dejan Soskic.

Meantime, the central bank will refrain from easing monetary policies that would result from a cut in the minimum reserve requirements for banks, currently at 5 percent for short-term dinar deposits and 30 percent for short-term foreign currency deposits, Soskic said.

The statistics office will report October inflation on Nov. 11. The September annual rate dropped to 9.3 percent from 10.5 percent in August after last year’s prices were fueled mainly by rising costs of food and fuel.

“These inflationary pressures have been pretty much exhausted in the first half of the year,” Soskic said today in Belgrade. Inflation may fall back to the target band of 4 percent plus or minus 1.5 percentage points in the first quarter of 2012 should there be no “major price shock.”

Inflation is also sensitive to the exchange rate of the dinar, especially during times of strong currency moves, said Soskic. The dinar’s managed rate movements, part of the inflation targeting monetary policy framework, helped Serbia weather the global recession better than some other countries.

“The flexible exchange rate has served Serbia quite well and kept official reserves at a historic high” of 11.35 billion euros ($15.62 billion) at the end of September, Soskic said.

Weakening Dinar

The dinar weakened 0.9 percent today in Belgrade to 102.1485 at 3:46 p.m., maintaining a 4.26 percent gain against the euro this year so far, according to Bloomberg data. Bankers blamed the move on concern that Greece may fall out of the euro area.

“Some foreigners are cutting down their exposure, waiting to see what happens next,” said Ratko Guduric, the deputy head of treasury at Belgrade-based Vojvodjanska Banka AD, part of the National Bank of Greece SA (ETE) group. “It’s not that they have a bad perception of Serbia, it’s all because of Greece.”

To contact the reporter on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net

To contact the editor responsible for this story: Alan Crosby at acrosby1@bloomberg.net