Central Bank Serbia Holds Rates Steady

The National Bank of Serbia held its key policy rate unchanged at 5.75% at its September 2026 meeting, leaving borrowing costs at the same level since September of 2024, citing caution over the impact of the international developments on actual and expected inflation trends. Headline inflation remained below the midpoint of the target range of 3±1.5%, having eased to 1.9% in July, reflecting greater resilience than expected by policymakers. Inflation is expected to fluctuate around the 4% level from September, where it will remain throughout 2027. Economic activity also improved in the second quarter of 2026, accelerating past estimates to 3.8%, while economic growth is projected at 3.2% in 2026 and 4.5% in 2027. On the labor market, unemployment is at 7.2%, its lowest level on record. However, policymakers highlighted elevated uncertainty regarding the conflict in the Middle East, while spillover effects cannot be rulled out.

The National Bank of Serbia held its key policy rate unchanged at 5.75% after its August 2026 meeting, holding benchmark borrowing costs at that level since September of 2024. The prolonged period of unchanged rates indicated the NBS sees risks of inflation and unemployment at a relatively balanced, despite macroeconomic headwinds from the war in the Middle East and its impact on global energy prices. July data showed that headline inflation fell to a five-year low of 1.9%, within the lower end of the tolerance band of 1.5% to 4.5%. Expectations of incoming base effects from the central bank drove the Executive Board to signal that inflation could rise to 4% by September. Similarly, the dinar held close to the 101 per USD mark, not too far from its strongest since late 2021. Still, expectations that the GDP will pick up during the year limited the upside of looser financial conditions.

The National Bank of Serbia kept its key policy rate unchanged at 5.75% during its July 2026 meeting, citing risks stemming from geopolitical tensions. Headline inflation accelerated to 3.5% in May, its highest level since mid-2025, but remained within the central bank's target range of 3±1.5%. The increase was driven by higher global oil prices, partly offset by government measures. Economic activity accelerated to 3.2% in Q1 2026 from 2.2%, supported by the service sector and agriculture, with favorable trends in manufacturing, retail and turism. The central bank expects inflation to ease by September and remain around the upper end of the target range, although it could temporarily exceed it in late 2026 or early 2027. Meanwhile, economic activity remains affected by global uncertainty and volatile energy prices. Future decisions will aim to maintain exchange rate stability, taking into account inflation trends to which will react with all available instruments.