Serbia's annual rate of consumer prices inflation fell last month to a 50-year low of 1.3 percent, the central bank said on Friday, potentially heralding an August cut in interest rates. The bank, which on Thursday opted against a third cut in its benchmark interest rate in as many months, said it expected annual inflation to bounce back to within its target band of 4 percent plus or minus 1.5 percentage points over the coming months.
Annual inflation had stood at 2.1 percent in May, but there was a mere 0.1 percent rise from May to June, mainly because of a drop in prices of some agricultural products, food and beverages. The state statistics office said that prices of household goods fell by 1 percent, with prices of beverages, tobacco and health services also slightly down. "We have stagnation, or a drop in both demand and purchasing power, and that led to very low inflation or deflation in some sectors," said Miladin Kovacevic, deputy director of the statistics office.