After declining by 0.1% in August, the consumer price index (CPI) rose by 0.3% in September and by 0.6% in October, driven by higher food and fuel prices. Food price inflation picked up from 0.9% in August to 2.2% in October, reflecting rising prices of bread and cereals, sugar and vegetables. Inflation in the transport and communications category accelerated as a result of higher motor fuel prices, which increased from 7% year on year in August to 11.4% in October, and the introduction of higher prices for postal services, which went up by 11.6% month on month in October. The prices of alcohol and tobacco continued to decline, helped by the absence of any increase in excise duties in 2010. However, the authorities have announced that they will raise alcohol and tobacco excise duty rates in January 2011 in a move towards harmonising domestic excise rates with the minimum rates prevailing in the EU.

Inflation in most other categories remained subdued, reflecting the continuation of weak domestic demand and low prices on the markets of countries that are the main sources of Montenegro's imports. Deflation in housing and utilities-the biggest spending category after food-stabilised at around 7% year on year in the third quarter, reflecting a decline in rents and an 11.3% decrease in the price of electricity.