ECONOMY

Serbian central bank: High inflation may spark unrest

BELGRADE (Reuters) – Serbian central bank Governor Radovan Jelasic said yesterday 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 to three months people will take to the streets, asking for higher wages,» Jelasic told Radio B92. «The government promised inflation of 6 percent for this year. Headline inflation is already at 11.3 percent,» 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 percent gas price hike yesterday, one in a series of price increases implemented since the start of the year. Electricity prices have gone up by 7.6 percent and bread prices have risen by 30 percent so far this year. Meat prices are due to rise by 10 percent and a liter of petrol will breach a psychological barrier this week to retail at 101 dinars. Core inflation, targeted in a 3-6 percent band for 2008, rose to 6.5 percent in February and the dinar currency – the main monetary policy transmission channel – lost 5.1 percent 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 percent on February 28.