No issue has stirred such debate recently as inflation. In this paper, inflation factors are divided into three groups: 1) global - which dictated inflation movements in 2020 and 2021 in the majority of countries; 2) base effect, which was also a shared component; 3) domestic factors, specific for each country, which gave rise to the differences in the monetary policy response. Factors of ongoing global inflation movements are presented, as well as the assessment of its character in the case of Serbia. The paper offers a response to what monetary policy can and should do in order to preserve price stability over the medium run. Generally, the decomposition of y-o-y inflation rates into global, regional and domestic factors by applying the principal components method indicates that global factors played a key role in determining inflation growth in Serbia and the neighbouring countries in 2021. Also, autocorrelation functions for various groups of price time series were assessed -unprocessed food, processed food, petroleum products and core inflation, where the results obtained indicate that core inflation is a relatively good estimate of the durability of inflationary pressures, as well as that deviations of headline inflation from core inflation are, as a rule, temporary in nature. All of the NBS analyses suggest that there are no fundamental demand-side pressures that would drive Serbia's inflation up in the medium term.