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The National Bank of Serbia kept its key policy rate at 5.75% on Thursday, October 8, leaving borrowing costs unchanged as higher global energy prices and geopolitical uncertainty raised risks to the inflation outlook. The Executive Board also held the deposit facility rate at 4.5% and the lending facility rate at 7.0%.
The decision extends the central bank’s rate pause, which began in September 2024. The bank said it weighed current and expected inflation alongside risks from international developments. Although inflation remains within its target tolerance band, officials warned that a prolonged energy shock and higher prices for other commodities could push risks upward.
Energy prices shape the inflation risk
The NBS cited renewed increases in crude oil prices, alongside rising natural gas and electricity prices, amid continued conflict in the Middle East. It said Serbia’s reductions in petroleum-product excise duties and use of available energy reserves had so far helped limit more pronounced effects on domestic fuel prices.
But the bank cautioned that a prolonged conflict or further geopolitical escalation could affect global production and transport costs, supply chains and capital flows, with knock-on consequences for inflation. Serbia’s reliance on imported energy makes those developments particularly relevant to its domestic price outlook, according to the statement.
Annual inflation edged up to 2.2% in August from 1.9% in July, which the NBS attributed mainly to the ongoing energy shock and higher global oil prices. The bank expects inflation to hover around 4% from September, partly because the comparison with a year earlier will no longer reflect the same downward effect from a government decree that capped trade margins.
The NBS’s August medium-term projection envisaged annual inflation staying within its target tolerance band over the following two years. In Thursday’s statement, the Board said the risks around that outlook had shifted higher because of the prolonged energy shock and stronger-than-expected increases in global prices for other primary commodities.
Growth remains firm, with services leading
Serbia’s economic activity rose 3.5% in the first half of 2026 compared with the same period a year earlier, the central bank said. Services made the largest positive contribution, supported by private consumption, while manufacturing, mining, construction and agriculture also recorded increased activity.
Monthly indicators for July and August pointed to continued strength in services during the third quarter. Industrial production, however, was affected by drought and lower water levels, the NBS said. The Board expects economic growth of at least 3.2% this year and about 4.5% in 2027.
The central bank expects domestic demand to be the main growth driver, with consumption and investment both contributing. It linked support for demand to higher disposable incomes and the continuation of infrastructure projects under the government’s “Leap into the Future – Serbia EXPO 2027” programme.
Policy remains cautious; next decision due in November
The NBS said it would continue a cautious monetary policy while maintaining relative stability in the exchange rate. Future rate decisions will depend on incoming data and what they indicate about the inflation outlook, rather than on a pre-announced path.
The Board said it would use available instruments if higher global oil prices were found to be generating stronger second-round effects through inflation expectations and prices beyond energy. It did not announce a change to the rate outlook on Thursday.
The next rate-setting meeting is scheduled for November 12. Until then, the central bank’s stated focus is on developments in energy and other commodity prices, their pass-through to domestic inflation, and evidence on economic activity. Thursday’s hold preserves the existing policy setting while those risks remain under review.
