Serbia Interest Rate

NBS leaves rates unchanged again in August

NBS remains on hold for 23rd straight month: At its meeting on 13 August, the National Bank of Serbia (NBS) kept the key policy rate at 5.75%, where it has stood since September 2024.

Brightening inflation outlook provides scope to hold: The Bank has maintained a cautious policy stance since the U.S.-Iran war erupted in late February, refraining from interest rate cuts. Still, the NBS's statement was more constructive than in prior months: Inflation eased to 2.0% in July, below the 1.5–4.5% target’s midpoint, as a strong fruit and vegetable harvest tempered price pressures and second-round effects from the energy shock have so far failed to materialize. As a result, the Bank now expects inflation to run lower than initially projected and to stay within the target band through the end of its projection horizon, giving it room to stand pat. That said, the Bank still sees a temporary pickup in inflation to around 4% in September due to a low base effect from September 2025, when a 20% retail margin cap was introduced. Meanwhile, GDP growth accelerated in Q2 from the prior quarter, reducing pressure on the NBS to support activity through looser monetary policy.

NBS likely to hold rates through year-end: While the NBS did not provide specific forward guidance on future decisions, it noted that it could tighten monetary policy should the Iran energy price shock have stronger-than-expected second-round effects on domestic prices. The majority of our panelists now foresee interest rates remaining on hold through the end of 2026. The next meeting is scheduled for 10 September.

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