11.06.2026.
At its meeting today, the NBS Executive Board voted to keep the key policy rate at 5.75%. It also kept the deposit facility (4.5%) and lending facility (7.0%) rates unchanged.
In making this decision, the Executive Board primarily took into account actual and expected inflation, as well as risks from the international environment that could affect its trajectory.
Consistent with the Board’s expectations, y-o-y inflation amounted to 3.3% in April. Its acceleration from 2.8% in March was almost entirely driven by the sharp rise in global oil prices and the consequent increase in domestic petroleum product prices. The rise in petroleum product prices would have been even more pronounced had the government not introduced measures such as reducing fuel excise duties and supplying the market from strategic reserves. In the Board’s assessment, inflation is expected to remain within the target tolerance band until September. Thereafter, towards the end of this year and the beginning of next year, it is likely to marginally exceed the upper bound of the target band on a temporary basis, reflecting higher global prices of oil and other primary commodities, as well as the low base from September last year, when wholesale and retail trade margins were capped at 20% under a government decree. Assuming that the current energy shock is temporary, inflation should subsequently decelerate and return within the target band by mid-2027, remaining there in the remainder of the projection horizon. In the Executive Board’s view, the slowdown in inflation over the coming year will also be supported by the continued restrictive monetary policy stance, the expected gradual easing of cost-push pressures from the international environment, and the anticipated moderation in real wage growth.
The conflict in the Middle East and the closure of the Strait of Hormuz for the majority of ships raised concerns that the energy crisis could push global inflation back up. The rising global price of oil represents a supply-side shock, increasing inflation directly, through higher fuel prices, and indirectly, through higher costs for corporates. On the other hand, this leads to a reduction in the household disposable income, while giving rise to uncertainty and undermining economic activity. In turn, this further complicates the monetary policy decision-making process. For the time being, data indicate that primary inflation effects are dominant in the majority of countries, and central banks are voicing readiness to respond by lifting their policy rates in the event of a major increase in inflation expectations and wages. As a large energy net importer, Europe is particularly sensitive to energy shocks. Inflation in the euro area, our key economic partner, rose to 3.2% in May (from around 2% before the conflict broke out), notably on account of the escalation of the Middle East conflict and the rising global oil prices. Uncertainty as to the macroeconomic effects of the Middle East conflict remains high, as there could be a major increase in the prices of container shipping and mineral fertilisers, as well as disruptions in value chains, investment and consumer confidence, and goods and capital flows. The final effects of the energy shock on global inflation, as well as inflation and economic activity at home, are difficult to estimate as they depend on the duration and intensity of the conflict.
According to SORS data, real y-o-y GDP growth amounted to 3.2% in Q1 2026, exceeding the flash estimate of 3.0%. In addition, available monthly indicators for April point to positive developments in industry, retail trade and tourism, which is in line with our May projection of 3% economic growth in 2026. Since the beginning of the year, GDP growth has been driven by both domestic demand and net exports, while in the period ahead additional positive effects on economic activity may be expected from investment projects under the “Leap into the Future – Serbia Expo 2027” programme, and in 2027 also from the hosting of the Expo. Economic activity is further supported by growth in lending to corporates and households, which accelerated to 17.1% y-o-y in April. Nevertheless, economic activity continues to be affected by global uncertainty stemming from geopolitical tensions and rising energy prices, which may have a negative impact on investment and consumer confidence, as well as capital flows.
In such circumstances, the NBS continues to pursue a cautious monetary policy while maintaining relative stability of the exchange rate. If assessed that the increase in global oil prices is having more pronounced second-round effects on other prices through inflation expectations, the NBS will respond using all available instruments.
The next rate-setting meeting will take place on 9 July.
Governor’s Office
