Serbia entered the second half of 2026 with headline inflation under control, but the underlying price picture remains less comfortable than the headline figure suggests. Annual consumer-price inflation slowed to 2.7% in June, placing it below the 3% midpoint of the National Bank of Serbia’s target and safely within the permitted range of 3% ±1.5 percentage points. That result represents a significant improvement from the inflationary pressures experienced earlier in the decade.
The composition of inflation, however, matters as much as the overall rate. Fuel prices increased by close to 11% between March and May, adding around one percentage point to inflation before the June slowdown. Food prices then moved in the opposite direction, supported by a favorable supply of new fruit and vegetables. Their declining contribution helped bring headline inflation back to 2.7%.
Core inflation tells a more cautious story. Excluding food, energy and regulated prices, inflation remained at 4.6% in June. Services were the principal driver. Unlike food and fuel prices, which can change quickly as harvests and international markets shift, service prices tend to react more slowly because they are influenced by wages, rents, domestic demand and business operating costs. The difference between headline and core inflation therefore indicates that Serbia’s disinflation process is not yet complete.
Inflation expectations remain relatively well anchored. Financial-sector respondents surveyed by Ninamedia expected inflation of 3.6% one year ahead, while Bloomberg’s July survey produced a somewhat higher figure of 4%. Expectations over two- and three-year horizons remained around 3–3.5%. This gives the central bank room to assess incoming data without having to react to a loss of public or market confidence.
Nevertheless, the NBS kept its policy rate at 5.75% in July. Its caution reflects both domestic and external risks. The official projection envisages inflation remaining below the target midpoint during July and August before moving close to, or temporarily above, the upper limit in late 2026 and early 2027. Base effects, energy prices, agricultural conditions and geopolitical tensions are all capable of producing renewed volatility.
The central monetary-policy question is therefore no longer whether inflation has declined. It clearly has. The question is whether slower headline inflation can be converted into a sustained moderation of service prices and wage-sensitive components. Premature easing could reinforce already strong domestic demand, while excessive restraint could unnecessarily weaken investment.
Serbia has completed the first part of the disinflation journey. Completing the second will require wage growth to become more closely aligned with productivity, inflation expectations to remain anchored and energy shocks to avoid spreading into the broader price system.
