11/09/2025
At its meeting today, the NBS Executive Board voted to keep the key policy rate on hold, at 5.75%. It did not change the deposit (4.5%) and lending facility (7.0%) rates either.
The Board made the decision primarily in view of the achieved and expected inflation, as well as factors from the domestic and international environment affecting its movements. Having slowed to 3.8% in May, y-o-y headline inflation in Serbia picked up to 4.6% in June and 4.9% in July, mostly due to the impact of adverse weather on growth in food prices (notably unprocessed food) which was pronounced at the start of this year’s agricultural season. Thus the 8.1% y-o-y growth in the prices of food and non-alcoholic beverages in July accounted for slightly more than a half of headline inflation. Core inflation (CPI excluding food, energy, alcohol and cigarette prices) remained unchanged in July relative to June and measured 4.7% y-o-y – it was below headline inflation for the first time since April 2024.
As for inflation movements going forward, the Executive Board expects to see a decrease in consumer prices (especially food prices) as a result of the Serbian Government’s Decree on special conditions for trade in certain types of goods, capping wholesale and retail margins at 20%. Accordingly, the Board expects a significant slowdown in y-o-y inflation in September, and thereafter its relatively stable movement within the target tolerance band until the end of the year. The following year, inflationary pressures should subside further on account of lower cost-push pressures from the international environment and the effects of the dollar’s weakening against the euro, as well as the still tight monetary policy of the National Bank of Serbia. The arrival of the new agricultural season should result in inflationary pressures receding further in the coming year, while the low base from September this year will act in the opposite direction due to the adoption of the Decree.
In explaining its decision, the Executive Board emphasized that caution is necessary in monetary policy conduct. Though less intense than a few months ago, uncertainty in the international environment remains pronounced, primarily due to the still uncertain future trade policies of leading world economies and geopolitical tensions. The tariff agreement between the USA and the EU has eliminated some of the risk, while the deadline for negotiations with China has been extended by another 90 days. Moreover, geopolitical tensions continue to pose substantial upward risk to global prices of oil and natural gas, though these prices subsided after the declaration of ceasefire in the Middle East and the start of negotiations between Russia and Ukraine. With regard to monetary policy decisions of leading central banks, market participants assess that the ECB’s monetary policy easing is nearing its end, while the Fed is expected to resume its rate-cutting after a longer pause.
SORS data confirm that GDP growth measured 2% y-o-y on average in H1. According to the same source, industrial production sped up to 5.5% y-o-y in July, and to 3.0% since the start of the year, guided by growth in manufacturing and mining, with decline in the energy sector slowing down. This is consistent with the Executive Board’s expectations that economic activity will gather pace in the latter half of the year, primarily driven by earlier investment in the automobile industry. Given the expected accelerated implementation of government infrastructure projects within the “Leap into the Future – Serbia Expo 2027” programme, the Executive Board expects GDP to rise by 2.75% this year and speed up to the range of 4–5% in the next two years. In addition, the Executive Board assesses that monetary policy measures – the maintained relative stability of the exchange rate and more favourable credit financing conditions, which resulted in double-digit growth in lending to corporates and households (11.4% y-o-y in July) – provide support that enables the acceleration of economic growth. Further support to lending and, by extension, economic activity is also expected to come from more favourable borrowing conditions for young people buying their first real estate, and for lower-income citizens and pensioners.
The Executive Board will continue to follow and analyse developments in the domestic and international markets and make monetary policy decisions on a meeting-to-meeting basis depending on the incoming data, the outlook for inflation and its key factors, and the assessment of the effects of adopted monetary policy measures. In making its decisions, the Board will remain mindful of the preservation of financial stability and a favourable growth outlook.
The next rate-setting meeting where economic developments will be considered is scheduled for 9 October.
Governor's Office
