Serbia Hikes Rate for 1st Time in 3 Years

The National Bank of Serbia hiked its key policy rate by 25bps to 6.0% in its November 2026 decision, breaking the streak of unchanged rates that started in October 2024. The Executive Board noted that prolonged uncertainty in the international environment due to the war in the Middle East continued to increase prices of oil, natural gas, and electricity, which recently triggered a jump in domestic refining margins. The Board cited increased risks of secondary effects on inflation from high energy prices as a reason for raising interest rates. Inflation rose to a 14-month high of 4.4% according to the latest data, loosely aligned with the central bank's expectations. In turn, real GDP growth is expected at 4.0% in the third quarter, indicating robust economic activity and adding leeway for higher interest rates to combat inflation.

The National Bank of Serbia held its key policy rate unchanged at 5.75% after its October 2026 meeting, where they have stood since September 2024, but emphasized that upside inflation risks warrant close monitoring. The central bank noted that a pro-inflationary tilt to the economic outlook has emerged since the summer, as crude oil and natural gas prices rose sharply and could make their way into other areas of the Serbian economy. Annual inflation picked up to 2.2% according to the latest data, rebounding from the five-year low of 1.8% in July, and the Executive Board of the NBS expects headline inflation to rise to 4% as base effects normalize. Meanwhile, economic activity gauges were firmly higher year-on-year and private consumption was robust.

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.