In Belgrade, inflation has finally come down. After a turbulent spell of double‑digit price rises following the 2022–2023 energy shock, Serbia now finds itself in the comfortable, if slightly boring, realm of mid‑single‑digit inflation. The headline rate flirts around the low‑3% mark, with the central bank pencilling in a modest rise toward 4% by year‑end. But despite such benign readings, the National Bank of Serbia (NBS) is keeping its benchmark rate anchored at 5.75%, a level that feels more suited to a time of crisis than to the current period of calm.
The bank’s reasoning is clear: anchor expectations first, cut later. With the policy rate sitting above headline inflation, Serbia is effectively locked into a high‑real‑rate regime. The lending facility at 7.0% and the deposit facility at 4.5% create a corridor that keeps borrowing for firms and households modestly expensive. This is a deliberate choice, not an accident. The NBS wants to avoid a “relief‑rally” in inflation, especially if global energy markets reignite or geopolitical tensions spill over into commodity prices.
The downside is that Serbian firms are paying relatively steep rates for credit just as global demand slows and eurozone growth falters. For export‑oriented manufacturers—auto components, electronics, textiles—every extra percentage point on the interest bill eats into margins. Yet, by keeping the dinar stable and inflation inside the 3% ± 1.5 target band, the central bank is also building long‑term credibility. Investors in the region now view Serbia as one of the more disciplined, price‑stability‑oriented economies in Southeast Europe, even if that discipline comes at the cost of slightly slower growth.
The big question is when the NBS will start to ease. The bank has signalled that the first cuts will be gradual and data‑dependent, waiting for evidence that inflation will stay contained and that wage growth does not outpace productivity. Markets widely expect the first tentative reductions to arrive either late in 2026 or early in 2027, but only if the global backdrop remains cooperative. Until then, Serbia’s monetary policy will remain a story of cautious restraint: calm inflation, elevated rates, and a slow, deliberate path toward normalization.
