National Bank of Serbia leaves rates unchanged in January

Central Bank holds rates for fourth consecutive meeting: After standing pat in December, the Executive Board of the National Bank of Serbia (NBS) once again decided to maintain the key policy rate at 5.75% at its meeting on 10 January. It also kept the rates on deposit and lending facilities unchanged at 4.50% and 7.00%, respectively. The decision marked the fourth consecutive hold and largely aligned with market expectations.

NBS maintains wait-and-see approach: The Bank stated that the effects of its prior 75 basis point reduction had yet to fully filter through the economy. Additionally, the NBS highlighted that a cautious approach was required due to uncertainty in the international environment, including elevated geopolitical tensions and global market fragmentation. The Bank also mentioned uncertainty in energy prices and recent droughts as factors that called for a prudent monetary policy stance.

Central Bank to cut rates this year: The NBS did not provide specific forward guidance on future interest rate movements, stating instead that it will continue to closely monitor and analyze trends in both domestic and international markets. Our Consensus is for the Bank to cut rates by around 100 basis points this year, with some panelists expecting a first 25 basis point cut in Q1. The next meeting is set for 13 February.

Panelist insight: Mate Jelic, analyst at Erste Bank, commented: “With expected gradual easing of inflation later in the year and hopefully more clarity on possible tariffs by the new U.S. administration, overall global policy uncertainty should drop as well allowing for further key rate cuts. We still expect a total of 100bp cuts in 2025, although risks are tilted towards less rather than more cuts.”

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