. 0 2. 7 romania 8 10 12 2 hungary 8 10 9 11 1 inflation poland czech republic 8 10 12 2 core inflation 8 10 9 11 1 serbia inflation target 8 10 12 2 8 10 tolerance band sources : central banks of selected countries. according to our new central projection, we expect y - o - y inflation to temporarily move above the upper bound of the target tolerance band until mid - 2022, when it will first return within the band and then go down to the lower part of the band by end - year, where it will remain in 2023 as well. this will be facilitated by the expected waning of the effects of the above temporary factors, as well as the measures undertaken by the national bank of serbia so far towards curbing monetary accommodation. chart 4 inflation projection ( y - o - y rates, in % ) - 1 - 2 source : nbs. as a response to global cost - push pressures being higher than anticipated and spilling over onto the local market, the national bank of serbia took steps towards reducing the degree of monetary policy accommodation in order to limit the growth of inflation expectations going forward and their spillover onto the prices of other products and services. using the flexibility of the existing monetary policy framework to change monetary conditions without changing the main interest rates, as of october the national bank of serbia raised the average effective rate in auctions of the repo sale of securities by 17 bp, hence it currently measures 0. 28 %. also, repo purchase auctions of securities, which provided dinar liquidity to banks, were discontinued in october. chart 5. interest rate movements chart 6 lending activity to the non - monetary sector ( daily data, p. a., in % ) ( y - o - y growth rates in %, excluding the exchange rate effect ) - 5 beonia key policy rate interest rate belibor 1w interest rate on deposit facility interest rate on lending facility weighted average interest rate on repo sold securities sources : thomson reuters and nbs. - 10 - 15 - 20 enterprises households total source : nbs. when making these decisions, we estimated that favourable financing conditions can be maintained even at a somewhat lower degree of monetary policy accommodation, taking into account the positive effects of the prior comprehensive monetary and fiscal measures. owing to the maintained favourable financing conditions and at the same time preserved quality of bank assets, lending remained an important factor ensuring growth in private investment and consumption. the volume of lending increased during q3, notably

taxes services construction industry agriculture gdp ( in % ) - 1 - 2 - 9. 3 - 12 - 10 - 8 - 6 - 4 sources : nbs projection and imf weo ( october 2021 ). * nbs projection for 2021. - 2 2021 * 2023 * sources : sors and nbs. * nbs estimate. increased cost - push pressure stemming from the global energy market, agricultural products and processed food. in addition, cost - push pressures are also created by halts in global value chains, the lack of logistics capacity and the shortage of some raw materials, which – in conditions of stepped - up demand in the wake of the opening of most economies – leads to higher inflation rates in almost all countries and upward revisions of their projections. still, like the majority of central banks and relevant international institutions, such as the international monetary fund, we estimate that these cost - push pressures are largely temporary, since they are triggered by the imbalance between supply and demand at the global level, i. e. the fact that supply cannot adapt to increased demand in the short term. as demand and the gradual increase in supply normalise over the coming period, we expect cost - push pressures to go down as well. these global factors were also mirrored by inflation in serbia – from april until july it moved around the target midpoint, only to go up as of august and reach 6. 6 % y - o - y in october. the rise in inflation in the second half of the year was expected and announced in the august inflation projection ; however, the seasonally uncommon rise in the prices of unprocessed food, attributable to high temperatures and the drought, as well as the unexpected further growth in global oil prices, drove inflation up to a higher level relative to the august central projection. still, unlike the majority of other countries in the region pursuing inflation targeting, where core inflation is either around or above the upper bound of the target tolerance band, core inflation in serbia remained in the lower part of the target band and equalled 2. 7 % in october. what contributed to this the most is the relative stability of the exchange rate and medium - term inflation expectations of the financial and corporate sectors, anchored within the target band. chart 3 cpi movements in selected cesee countries ( y - o - y rates, in % ) 7. 9 6. 8 6. 6 6. 5 6. 6 5. 8 4. 7 4. 5 4