January 29 (SeeNews) - Erste Group said on Monday it expects Serbia's inflation to stay below the 1.5%-4.5% target band of the country's central bank in the first half of 2018 and to quicken afterwards.
Inflation developments in the first half of 2018 will be mostly determined by the high base effect of petroleum and meat prices in 2017, Erste Group said in a Central and Eastern Europe Insights report.
In the second half of the year, Erste expects a gradual acceleration of inflation towards and above the target band.
Erste Group analysts expect that the base effect will fade out in the second half of the year, as commodity prices on international markets will be higher, the dinar will be at weaker levels and the effects of the stronger labour market and domestic demand will kick in.
Therefore, Serbia's inflation is expected to accelerate to 3.5% in the fourth quarter of 2018, Erste Group said.
Serbia's average annual consumer price inflation quickened to 3.0% in 2017 from 1.2% in 2016, according to data of the country's statistical institute.
Earlier this month, Serbia's central bank decided to keep its key repo rate unchanged at 3.5%. The inflation rate will remain within the target band of 1.5%-4.5% in the short term, the central bank said. Inflation is likely to stand in the lower part of the target band in the first half of 2018, due to the low price base of petroleum products and other products which recorded one-off hikes in early 2017. The expected rise in domestic demand will work in the opposite direction, the central bank noted.