Serbia's consumer price inflation cooled to 1.6% y/y in November 2013 from 2.2% y/y a month earlier on contracting food and transport prices, the statistics office said in a statement. The annual CPI inflation fell below the lower bound of the central bank’s (NBS) target tolerance band of 2.5-5.5%, for a second straight month helped by weak domestic demand.

In monthly terms, the CPI went down 0.6% in November after inching up 0.2% in October.
Food and non-alcoholic beverages prices shrank 4.3% y/y in November for a second straight month after dropping 3.0% the month before, dragged down by falling meat, bread, fruit, vegetables and oil and fats costs. Transport charges continued retreating, declining 2.0% y/y in November following a 2.7% y/y drop in October.

Housing, water, electricity, gas and other fuel prices rose 7.9% y/y in November, slowing from a 8.5% hike the month before due to cooling heat energy and water supply costs. Furnishings and household equipment prices grew 5.1% y/y in October likewise easing from a 7.0% y/y rise in September. Alcoholic beverages and tobacco charges y/y growth ticked up to 10.5% in November from 10.2% in October.

Serbia’s CPI inflation accelerated in the second half of 2012, fuelled by rising food prices due to the poor agriculture season last year. It started cooling since February 2013, due to past restrictive monetary policy measures, weak demand and lower food production costs due to good weather conditions and a strong harvest.

The NBS expects inflation to increase moderately in December and to stabilize at around 4% in the near-term. The forthcoming increase of the lower VAT rate to 10% from 8% will have a one-off impact on prices while depressed domestic demand and low food costs will push the overall index down, according to the NBS.