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EEMEA Macro Flash - Serbia: Big jump in inflation due to energy and food prices

  • Inflation increased much more than expected in April, from 1.8% to 2.8% yoy, driven by energy and food prices.
  • The surprise was the increase in food price inflation, mainly due to a non-seasonal increase in vegetable prices.
  • Core inflation remained stable at 1.8% yoy, indicating no changes in underlying price pressures for consumers.
  • We see inflation somewhat above 3% in May before a temporary slowdown over the summer and back to close to 3% at year-end provided there are no other unexpected shocks in food prices.
  • Oil prices and global supply disruptions present the main upside risks to this outlook, as also indicated by the significant increase in producer price inflation.
  • We do not expect significant implications for monetary policy given that the increase in inflation was driven by supply shocks. We see a low likelihood of changes in monetary-policy rates in 2021-22.

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