compared with the countries with flexible regimes. the macroeconomic and financial developments in the cee countries are puzzling in the sense that they are neither in line with economic theory, and nor do they reflect the empirical findings that are usually observed in other catching - up economies, including the cohesion countries in the 1990s. ” as far as the recent use of policies is concerned, he pointed out four of them, namely fiscal policy, structural policy, supervisory and prudential policy and, last, but not least, monetary and the exchange rate policy. as far as monetary and exchange rate policies are concerned, he stated the following : “ the ultimate question for a country is which monetary policy and exchange rate regime is best suited to ensuring a fast and stable convergence process. let me stress at this point that the relevant question to discuss is not a general discourse about the pros and cons of fixed versus flexible exchange rates – we should not try to apply this more academic debate to the central and eastern european countries as a whole. in the same vein, i also do not buy the opposing argument that i hear from time to time, namely that rushing into the euro would solve all the problems experienced by the central and eastern european countries. rather, the relevant question to ask is whether any exchange rate system is better suited for a country to cope with the country - specific challenges arising from real convergence. obviously, this can only be assessed on a country - by - country basis. ” of course, i am pointing this out for a very good reason. serbia operates with a ) a floating exchange rate – for some people even too much “ floating ” and b ) an active monetary policy – for some even “ overly active ” or better to say, too expensive, which is in my view a very relative term. despite daily criticism of monetary policy costs and uncertainties regarding exchange rate developments, we will remain firm in our commitment because we know that our way is the right one in the medium and long run! needless to say, it feels good to get confirmation from abroad, specifically from the ecb, that we are on the right track. at no time in the history of serbia and yugoslavia was the exchange rate floating more freely than it is today. direct involvement of the central bank is limited to a daily calculation of the medium exchange rate based exclusively on transactions among commercial banks. this is how we have been calculating the exchange rate day - by - day since march this year, and the last time the

which will negatively affect chiefly the yields of corn, soybean, sunflower and vegetables. the materialisation of the two key risks that we emphasised in our previous reports also reflects on our projections of key macroeconomic indicators for serbia, which we shall explain in detail during this conference. * * * as i stated at the beginning, in the period since our previous report, inflation in most countries has continued to rise above expectations, reflecting primarily the surge in energy and food prices, which intensified further with the outbreak of the ukraine conflict. in some countries, inflation is rising also on account of overheated domestic demand and labour market factors. in addition, although the costs of international overseas transport are falling, pressures on global inflation still originate from halts in global supply chains and shortages of some raw materials in production. due to such an interplay of factors, over the past months inflation in many advanced economies has been at multi - decade highs – in the usa at a record four - decade high, and in the euro area at the highest level since its establishment. in such an environment, central banks and international institutions continue to revise up their inflation projections for the coming period. however, the majority of central banks and international institutions assess that gradual calming of the situation in the market of primary commodities can be expected going forward, which should also result in a gradual deceleration of global inflation. chart 1 projected average inflation and target by country chart 2 policy rates across selected countries ( p. a., in % ) ( p. a., in % ) 70. 3 usa uk czech republic hungary euro area japan poland romania sources : consensus forecasts. canada united kingdom sweden usa inflation 2022 inflation 2023 target target tolerance band norway turkey euro area russia moldova ukraine georgia armenia serbia albania poland romania hungary czech republic 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 sources : central banks of selected countries. under the impact of elevated cost - push pressures mainly from the international environment, inflation in serbia continued to move along an upward trajectory and touched 12. 8 % y - o - y in july, of which around 70 % comes from food and energy prices. although in may, when we had data on april inflation, we assumed that inflation would continue up over the following several months, the intensification of geopolitical tensions and worse than expected agrometeorological conditions led to a higher than envisaged rise in food and energy prices over the previous months. on this