Serb CPI to Reach 14% by April on World Commodity Prices

Serbia’s inflation rate will peak at about 14 percent by April as policy makers struggle against rising global commodity markets and the threat of increased regulated prices to squeeze price growth back to its target.

The rate, at 12.2 percent in 2012, will begin to ease again in the second quarter and head lower to the central bank’s preferred range of 2.5 percent to 5.5 percent at the end of the year after surging in the current quarter, central bank Deputy Governor Veselin Pjescic said in Belgrade today.

The return depends on “jumping food and regulated prices” at home and “primary food and oil prices in global commodity markets” while tight monetary policy, weak aggregate demand and fiscal consolidation will keep a lid on prices in the medium term, Pjescic told reporters.

He spoke a day after the Belgrade-based Narodna Banka Srbije unexpectedly boosted the one-week repurchase rate by a quarter of a percentage point to 11.75 percent, its eighth increase in nine meetings since June, as it battles to bring down Europe’s second-highest inflation rate.

Pjescic said the economy probably will expand 2.5 percent, or 0.5 percentage points above the government’s forecast of 2 percent, led by expanding car and crude oil product exports.

Net exports are helping the Balkan nation narrow its current-account gap to 8.1 percent of economic output, or 2.7 billion euros ($3.65 billion), from 10.5 percent of gross domestic product in 2012.

The central bank is counting on 1.1 billion euros in net foreign-direct investments and 1.2 billion euros in net government external borrowing to finance the gap, he said.

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