Serbia’s inflation picture at the start of 2026 looks far calmer than it did during the previous inflation cycle. Annual inflation stood at 2.8% in March, still below the central point of the National Bank of Serbia’s 3.0% ± 1.5 percentage point target band. Monthly inflation was 0.5% in both February and March. On the surface, this gives policymakers room to feel more comfortable. In practice, the central bank has good reasons to remain cautious.
The composition of inflation is the key issue. Core inflation softened on a monthly basis from 0.3% in February to 0.1%in March, while non-core inflation increased from 0.7% to 0.8%. The annual core rate remained at 4.2%, while non-core inflation rose from 1.0% to 1.7%. This means inflation is not currently broad-based in the way it was during the earlier shock period, but volatile components are again becoming more important.
Fuel prices were the clearest source of pressure in March. Diesel rose 5.1% month-on-month, while petrol increased 4.2%. Tobacco was up 2.3%, and alcoholic beverages rose 1.2%. These increases were partly offset by a 3.6% fall in fruit and vegetable prices, but the broader lesson is that Serbia’s inflation path remains sensitive to energy and regulated or semi-regulated price categories.
That sensitivity explains why monetary policy has not turned aggressively dovish. The National Bank of Serbia kept the reference rate at 5.75%, maintaining the cautious stance that has been in place since September 2024. With inflation below 3%, a faster easing cycle might appear tempting. But Serbia’s exposure to oil prices, geopolitical disruption, imported energy costs and the unresolved refinery issue makes caution rational.
The monetary-policy challenge is not current inflation alone. It is the possibility of renewed cost pressure. Serbia imports part of its inflation through fuel, energy, commodities and the euro-denominated supply chain. The dinar remains stable against the euro, which helps contain imported price pressure, but stability itself depends on confidence, reserves and interest-rate credibility.
Energy-sector uncertainty is especially important. The unresolved issue around the Pančevo refinery has implications beyond industrial production. It can affect fuel availability, transport costs, wholesale margins and expectations. A refinery disruption can move from production data into consumer prices quickly, especially through diesel and petrol. That risk is why energy stability and inflation stability are now closely linked.
For households, the current inflation environment is supportive. Real wages rose 9.5% year-on-year in February, giving consumers a clear purchasing-power gain. Retail turnover rose strongly in March, helped by that income effect. But household confidence can weaken quickly when fuel and food prices start moving faster, especially for lower-income consumers whose budgets are more exposed to essentials.
For businesses, lower inflation reduces uncertainty, but high interest rates still matter. Financing costs remain relevant for working capital, investment loans, inventories and construction projects. Banks are still lending, but companies must manage margins in an environment where wages are rising, external demand is uneven and energy risk has not disappeared.
Serbia’s inflation performance is therefore a strength, but not a settled story. The data support macro stability. The risk structure supports policy caution. Inflation below 3% gives the economy breathing space, while fuel, energy and refinery-linked uncertainty limit the scope for complacency.
The central bank’s task in 2026 is to preserve credibility while the real economy moves through a mixed cycle. Price stability is no longer Serbia’s main weakness. It is one of its main defences. Maintaining that defence matters because the next inflation shock, should it come, is more likely to arrive through energy and external markets than through domestic demand alone.
