Serbia’s inflation outlook is increasingly divided, with financial institutions expecting price growth to remain near the central bank’s target while businesses and households anticipate significantly higher inflation. The National Bank of Serbia (NBS) reported that financial-sector expectations for inflation over the next 12 months remained at 3.5% in August, within the bank’s target range.
By comparison, companies expect inflation of 5% over the same period, while household expectations stand at 10%. The gap persists even though annual consumer-price inflation was 2.2% in August, below the expectations of all three groups. The divergence is relevant for monetary policy because inflation expectations can affect wage demands, corporate pricing and consumer spending, potentially influencing how quickly inflation returns toward target after temporary disinflationary factors fade. The NBS has maintained its key policy rate at 5.75%, with the expectations data adding to the considerations surrounding the timing of any monetary easing.
Businesses retain above-target inflation expectations
Companies expect inflation to moderate over longer horizons, but their projections remain above the NBS’s 3% target. Corporate expectations stand at approximately 4.4% two years ahead and 4.7% three years ahead. The figures indicate that businesses do not currently anticipate a complete return to the central bank’s target even over the medium term. These expectations can affect longer-term business decisions, including investment, wages and pricing. If companies continue to plan around inflation above 4%, those assumptions can influence salary negotiations, supplier agreements and the prices charged for goods and services.
Financial institutions have a different outlook. Their 3.5% one-year inflation expectation indicates that banks and professional market participants generally anticipate price growth remaining contained around the NBS target range. The resulting gap separates financial-sector expectations from those of businesses and households, which are more directly exposed to everyday purchasing and operating costs.
August data show changes beneath headline inflation
Serbia’s annual consumer-price inflation increased to 2.2% in August from 1.9% in July, even as food prices remained significantly below their year-earlier levels. Energy-related costs have moved in the opposite direction. Vehicle fuels and lubricants recorded substantial annual increases, while producer-price data have also shown considerably stronger growth in energy costs. The composition of inflation therefore differs from the headline CPI figure. Households face different price pressures depending on their spending patterns, while companies are exposed to energy, wages and other input costs that may not be fully reflected in the latest consumer-price reading.
External energy markets remain another source of uncertainty. Serbia is exposed to imported oil and gas prices, while domestic energy policy is also dealing with uncertainty surrounding NIS and the cost of ensuring sufficient energy supply.
NBS faces competing signals on interest rates
The divergence in inflation expectations has implications for the direction of monetary policy. A headline inflation rate close to 2% could normally support lower borrowing costs, particularly if economic growth remains moderate. However, expectations that remain above the NBS target complicate the case for rapid monetary easing. A reduction in interest rates while businesses continue to anticipate inflation around 5% could affect wage and pricing behaviour at a time when the central bank is seeking a sustained return toward its target.
At the same time, maintaining the 5.75% policy rate keeps financing conditions relatively restrictive for households and companies. That can weigh on private investment and credit demand while Serbia is implementing a large public infrastructure programme. The inflation challenge has therefore shifted from the earlier period of broad price pressures toward the question of whether lower headline inflation will become sufficiently credible to change expectations among businesses and households.
