Headline inflation in Serbia was 3.3% year on year in April 2026, after averaging 3.8% in 2025 and falling to 2.7% in December. Core inflation remained at 4.4% in April, with services cited as the main driver. The National Bank of Serbia (NBS) has pointed to the persistence of services-related price pressures and their link to domestic demand.
NBS projection for 2026–2027 and key conditions
The NBS expects inflation to stay within the target range through the remainder of the second and third quarters of 2026. It projects a temporary move above the upper bound late in 2026 and early in 2027, followed by a return to target by mid-2027. The forecast depends on several assumptions, including that energy prices do not rise too sharply, wage growth slows toward productivity growth, expectations remain anchored, and domestic demand does not overheat.
Energy is identified as the most visible external risk to the inflation path. The April rise in inflation was linked mainly to higher global oil prices and domestic petroleum prices. The NBS also cites geopolitical tensions, Middle East developments, transport costs, fertiliser prices and supply-chain risks as factors that can affect consumer prices, corporate costs and the current account.
Policy rate decision and transmission through credit
The central bank maintained a cautious stance on monetary policy, keeping the policy rate at 5.75% in May 2026. The NBS decision reflects a balance between supporting investment and credit demand through lower rates and avoiding reinforcement of household borrowing, services inflation and exchange-rate pressure. Holding rates steady is intended to allow time to assess whether the expected increase in inflation remains temporary.
Credit conditions are part of the inflation picture as lending growth supports consumption and services activity. Private-sector lending rose 16.9% year on year in March, while household lending increased 20.9%. Within household lending, cash loans were up 24.0% and housing loans rose 20.2%.
Wages, labour-market mix and exchange-rate management
Wage dynamics are another variable monitored for their impact on price developments. Average net wages increased by 11.2% nominally and 8.5% in real terms in January–February 2026. Real wage growth supports consumption and living standards, while slower real wage growth aligned with productivity is expected to help bring inflation back to target.
The labour-market indicators are described as mixed. Formal employment fell by 0.4% year on year in the first quarter, with weaker employment reported in manufacturing and trade, while services continued to add jobs. This employment mix may influence broad wage pressure over time because services-led growth can coincide with persistent services inflation.
The dinar’s performance is also highlighted as a stabilising factor for import-price dynamics and expectations. The currency weakened by only 0.2% against the euro in 2025 and by 0.1% from the start of 2026 to April. Exchange-rate stability is described as actively managed; the NBS sold €1.205bn net in the first four months of 2026 after selling €580mn net in 2025.
Inflation expectations and risks from external shocks
Inflation expectations remain a positive indicator for policy credibility. One-year-ahead expectations were around 3.5% in April according to one survey and around 3.8% in May according to another survey of financial-sector participants. Medium-term expectations stayed around 3.0–3.5%, close to the target midpoint.
The risk profile described by the NBS is not framed as a return to the earlier crisis environment but as a more nuanced set of pressures tied to multiple variables at once. Services inflation staying elevated, energy prices rising again, strong wages, rapid credit expansion, and public investment supporting domestic demand are all cited as elements that can interact even if none is singled out alone as alarming.
The final stage of stabilisation is presented as more demanding than earlier emergency disinflation measures because monetary policy must protect credibility while allowing investment and credit to support growth. The next test is whether inflation can return to target by mid-2027 without requiring a sharper policy response.
