March inflation lowest in last seven years

BELGRADE - Decrease in prices of food, vegetables in the first line, has resulted in Serbia's lowest inflation rate in the last seven years in March 2014 compared to the previous month.

A negative inflation of 0.3 percent was recoded in March, said Gordana Vukotic-Cotic, associate of Macroeconomic Analysis and Trends (MAT) magazine, adding that this is the lowest inflation since 2007.

As for the basic categories of the market basket which affect inflation, only the prices of energy remained unchanged, while the prices of other categories decreased, she said.

“Foods recorded the greatest price drops thus making the greatest contribution to deflation,” Vukotic-Cotic said.

She said that the year-to-year inflation in March stood at 2.3 percent, the first time this year under the lower limit of the allowed deviation from the target, four plus/minus 1.5 percent.

The price growth stagnated, and the increase of prices of non-food items, energy excluded, has slowed down.

Vladimir Vuckovic, member of the Fiscal Council, stated that due to deflation tendencies and deceleration of demand, a possibility is being opened for reassessment of the monetary policy.

Low inflation offers an opportunity for gradual, soft depreciation of the dinar without strong effects of transfer on inflation. Thereby, a possibility of faster and unexpected depreciation, which is risky, would be eliminated, Vuckovic said.

He said at the presentation of the new MAT issue that the question arises whether the current trend of the monetary policy is optimal.

“The definite answer is uncertain since it is connected with the forthcoming fiscal consolidation,” he said.

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