Serbia’s central bank kept its benchmark interest rate at 5.75%, while the European Central Bank increased its key rates by 25 basis points, creating additional pressure on euro-linked financing despite subdued domestic inflation. The National Bank of Serbia (NBS) maintained its benchmark rate for the ninth meeting of 2026, extending the unchanged-rate period that began in September 2024.
The deposit and lending facility rates remained at 4.50% and 7.00%, respectively. Hours later, the ECB raised its deposit rate to 2.50%, its main refinancing rate to 2.65% and its marginal lending rate to 2.90%, with the new rates taking effect on September 16. It was the ECB’s second 25-basis-point increase since June.
Serbian inflation remains below target midpoint
Domestic price developments have provided little immediate reason for the NBS to tighten monetary policy further. Annual inflation declined to 1.9% in July, below the central bank’s 3% target midpoint and within its tolerance range of 3% plus or minus 1.5 percentage points. The ECB, however, cited continuing inflationary pressures from the conflict in the Middle East. It projected euro-area inflation at 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028. The central bank also warned that the outlook remained unusually uncertain, with energy prices representing an important upside risk for inflation.
Euro-linked borrowing faces higher external costs
The ECB’s decision has implications for Serbian companies because a significant portion of corporate borrowing is denominated in euros or linked to the euro. Higher euro-area market rates can therefore increase refinancing costs for Serbian borrowers even while the NBS keeps domestic monetary policy unchanged. The impact will depend on individual loan structures and borrowers, while part of the ECB tightening may already have been incorporated into market rates before the latest decision.
Companies preparing major investments now face a less favourable external financing environment as Serbia seeks to expand investment in energy, infrastructure, manufacturing and real estate. Higher borrowing costs are particularly relevant for projects requiring substantial debt financing. Renewable-energy developers, industrial companies and property investors often structure financing over long periods, making changes in borrowing costs relevant to project returns.
Domestic financing remains bank-led
Serbia’s corporate bond market is beginning to develop, but bank lending remains the dominant source of corporate financing. The latest decisions leave Serbian companies facing different monetary conditions at home and in the euro area. Low domestic inflation provides little justification for additional NBS tightening, while higher euro-area inflation and ECB rates are increasing external financing pressures.
Following the ECB decision, the difference between the NBS benchmark rate and the ECB deposit rate will narrow to 3.25 percentage points from 3.50 percentage points. The spread does not mechanically determine Serbian monetary policy, but international interest rates remain relevant to capital flows, exchange-rate stability and financing conditions in an economy with extensive euro-linked borrowing.
Energy prices remain an inflation risk
The NBS has repeatedly identified international developments among the factors affecting its monetary-policy decisions. Energy-market volatility remains particularly relevant. Earlier this year, the central bank said higher global oil prices were already feeding into Serbian petroleum prices, although lower fuel excise duties and releases from reserves by the government helped moderate the impact.
A renewed increase in fuel, electricity or imported production costs could put pressure on corporate margins before its full effect appears in consumer inflation. The next inflation readings will therefore provide an important indication of whether the currently low inflation rate remains stable. With inflation at 1.9% in July, the NBS has limited immediate pressure to tighten policy, while renewed external inflationary pressures make an early rate cut more difficult to justify. For Serbian borrowers, the current 5.75% benchmark rate remains the domestic monetary anchor while euro-denominated financing has become more expensive.
