09.07.2026.
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.
Y-o-y inflation remained within the target tolerance band (3.0±1.5%), reaching 3.5% in May, in line with the Executive Board’s expectations, largely owing to the increase in global oil prices and the consequent rise in domestic petroleum product prices during that period. The increase in petroleum product prices stemming from higher global oil prices was partly mitigated by government measures, i.e. a reduction in fuel excise duties and the release of fuel from state reserves to supply the domestic market. The Board notes that food prices have recorded a y-o-y decline since November 2025, amounting to 1.5% in May 2026, and that, even three months after the expiry of the decree capping retail trade margins, there have been no significant price adjustments for the products previously covered by that measure. Given the favourable agricultural season to date and the fruit and vegetable yields, the prices of unprocessed food could exert a favourable (disinflationary) effect on inflation. Core inflation has remained relatively stable, hovering around the upper bound of the target tolerance band for headline inflation.
The Middle East conflict remains one of the principal sources of global uncertainty, although tensions eased for a time following the agreement on a ceasefire during negotiations aimed at bringing the conflict to an end. This was accompanied by a decline in global oil prices over the preceding month. Most central banks assess that the scale and duration of the conflict, as well as the time required for the normalisation of flows, call for a cautious approach to monetary policy conduct and the maintenance of its restrictive stance. The ECB raised its interest rate by 0.25 pp in June, to 2.25%, after inflation in the euro area reached 3.2% in May, and prior to the release of the June reading of 2.8%. This decision was taken with the assessment that the rate increase is necessary to bring inflation back to the 2% target in 2027. The Fed did not change the range of its federal funds rate in June. The NBS Executive Board will continue to carefully monitor geopolitical developments, movements in commodity and financial markets, the evolution of trade relations and the moves of leading central banks.
According to the May medium-term projection, inflation should slow down by September, thereafter settling around the upper bound of the target tolerance band as a consequence of the low base from September last year, resulting from the application of the decree which capped wholesale and retail margins at 20%. Due to the increase in the prices of global oil and other primary commodities following the outbreak of the Middle East conflict, as well as higher imported inflation, our projection anticipates that inflation could temporarily overshoot the upper bound of the target tolerance band by the end of this year or at the beginning of the next. Assuming that the recent energy shock was temporary and that the global oil price, which has recorded a decline over the past month, will remain around the current lower level at the end of this year and during the next, inflation should slow down and return relatively quickly within the target band (by mid‑2027), and then remain within those bounds until the end of the projection horizon. The Executive Board estimates that the slowdown of inflation over the next year will also be aided by the continued restrictive monetary policy stance, the expected gradual weakening of cost-push pressures from the international environment, as well as the expected moderation in real wage growth.
Real sector developments since the beginning of the year have been more favourable than anticipated. According to SORS data, real y-o-y GDP growth reached 3.2% in Q1, 0.2 pp above both the preliminary estimate and the assumption of the NBS Executive Board presented in the May Inflation Report. Growth was driven by the services sector, while agriculture also made a positive contribution. Real sector indicators for April and May point to favourable developments, with manufacturing recovering following a weaker start to the year caused by disruptions in the operations of NIS, alongside robust growth in retail trade turnover and tourism activity. Despite heightened global uncertainty and weaker demand from the EU and the region, Serbia’s export sector demonstrated resilience, supported by the diversification of its production base and export markets, as well as by predominantly export-oriented foreign direct investment. Relatively favourable weather conditions and the good state of crops provide a basis for expecting agricultural yields to outperform both last year’s results and the ten-year average. The Executive Board noted that, thus far in the year, GDP growth has been supported by both domestic demand and net exports, while additional positive effects on economic activity are expected in the period ahead from the hosting of the Expo. Economic activity is also being supported by strong growth in lending to the corporate and household sectors, which amounted to 16.4% y-o-y in May. Nevertheless, economic activity remains exposed to global uncertainty stemming from heightened geopolitical tensions and volatile energy prices, which could adversely affect investor 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. Going forward, the Executive Board will make decisions based on incoming data and their implications for inflation outlook. If assessed that the increase in global oil prices had stronger 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 13 August.
Governor’s Office
