Serb cbank: High inflation could trigger protests

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Serbian central bank governor Radovan Jelasic said on Thursday the government should not be surprised if people took to the streets in a few months time to protest over soaring prices.

“If this situation continues, in two-three months people will take to streets, asking for higher wages,” Jelasic told radio B92. “The government promised inflation of 6.0% for this year. Headline inflation is already at 11.3%,” he said. “It will take a lot of hard work and belt-tightening to bring it down.”

Serbia’s government was due to approve a 20% gas price hike on Thursday, one in a series of price increases implemented since the start of the year. Electricity prices have gone up by 7.6% and bread prices have risen by 30% so far this year. Meat prices are due to rise by 10% and a liter of petrol will breach a psychological barrier this week to retail at 101 dinars. Core inflation, targeted in a 3-6% band for 2008, rose to 6.5% in February and the dinar currency – the main monetary policy transmission channel -- lost 5.1% in two months. “We will try to do our part of the job and certainly our measures will boost the weakening dinar,” Jelasic said. “Under the circumstances, the National Bank is more likely to tighten than stay neutral (on rates).”

The National Bank of Serbia raised its two-week repo rate by 75 basis points for the second time in February to 11.5% on Feb. 28, trying to offset the weakness of the dinar in the aftermath of Kosovo’s secession. (Reuters)

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