In 2026, Serbia is experiencing a cautious phase of disinflation, as the National Bank of Serbia (NBS) navigates low headline inflation alongside persistent global risks and domestic price pressures. Following the significant inflation surge attributed to the 2022-2023 energy-price crisis, consumer price growth has gradually decreased, stabilizing around 2.5% to 3% in early 2026, with a slight uptick to approximately 2.8% to 3% by March. The central bank’s focus has shifted from combating high inflation to managing expectations while maintaining a sufficiently elevated key policy rate to prevent potential reversals.
Throughout the first quarter of 2026, year-on-year inflation in Serbia has remained within the low to mid-single-digit range. January recorded an inflation rate of about 2.4%, which increased to 2.5% in February and reached 2.8% in March—marking a four-month high yet still significantly lower than the crisis peaks of 5% to 6% observed during the previous two years. The core inflation rate, which excludes volatile food and energy prices, has been slightly higher due to increased wage growth and rising service sector prices; however, the overall trend indicates stabilization rather than overheating.
Several factors contribute to this moderation in inflation: a relatively stable energy price environment, an unexpectedly good harvest that mitigated food price increases, and targeted administrative measures such as temporary caps on essential goods. Conversely, costs associated with housing—including rent, utilities, and maintenance—have continued to rise gradually, alongside some upward adjustments in transport and personal care services pricing, keeping core inflation marginally above the headline figure.
Despite these favorable figures by regional standards, the NBS has cautioned that external shocks—such as renewed geopolitical tensions or potential disruptions in energy supply—could push inflation back toward the upper limit of its target band of 3% ± 1.5 percentage points.
In response to these conditions, the NBS has maintained its key policy interest rate at 5.75% since late 2024, reaffirmed during monetary policy meetings in March and April 2026. The deposit facility rate stands at 4.5%, while the lending facility is set at 7.0%, maintaining a relatively tight corridor compared to the low-inflation context. This approach signals that the central bank does not intend to reduce rates automatically once inflation falls within the target range; rather, it aims to keep a precautionary buffer against possible renewed price pressures or financial stability issues.
The NBS expects that inflation will remain within its target range throughout 2026 and into the medium term. This outlook is supported by three main factors: ongoing monetary restraint via a high key rate, regulatory measures aimed at curbing unfair trade margins on certain products, and a potentially robust agricultural season that could stabilize food prices.
However, maintaining a policy rate of 5.75% means that borrowing conditions for businesses and households remain somewhat restrictive. Although real interest rates have turned mildly positive in 2026, they do not yet create an accommodative environment for investors. Consequently, commercial lending rates for businesses and mortgages are still relatively high compared to regional averages, potentially impacting investment levels and large consumer purchases.
Authorities and analysts assert that this prudent approach is warranted given external risks such as diminished demand from the European Union and persistently elevated global borrowing costs, alongside Serbia’s own structural challenges like a notable current-account deficit prior to 2025 and ongoing reliance on imported energy resources. The NBS appears willing to sacrifice some domestic growth potential for enhanced macroeconomic stability and reduced risk of another inflation-driven tightening cycle.
Looking ahead, the central bank has indicated that any future rate cuts will depend on data trends and will be implemented gradually. Inflation readings from the first quarter and developments in wage settlements are expected to be critical indicators. If global inflation continues its downward trend while energy market tensions remain stable and domestic wage growth aligns with productivity improvements, market expectations suggest that the NBS may initiate a gradual normalization of interest rates towards late 2026 or early 2027—provided that price stability is firmly established.
