Serbia in 2026: disinflation slows, but the National Bank keeps rates on hold

Serbia’s inflation picture in 2026 is improving, yet the National Bank of Serbia (NBS) is treating the moment as one that requires caution rather than a quick pivot to easier money. After the sharp inflation spike triggered by the 2022–2023 energy-price shock, annual consumer-price growth has slowed to roughly 2.5–3% in early 2026 and edged up to about 2.8–3% by March—an outcome that supports disinflation, but does not remove the risk of renewed price pressure.

Inflation moderates, with core still elevated

For most of the first quarter of 2026, year-on-year inflation has stayed in the low-to-mid-single-digit range. January was reported at about 2.4%, rising to around 2.5% in February and then to about 2.8% in March, which was described as a four-month high. Even so, it remains well below the 5–6% crisis peaks seen in 2022–2023.

Core inflation—excluding volatile food and energy—has been somewhat higher, reflecting stronger wage growth and service-sector pricing. The overall pattern is therefore closer to stabilization than overheating.

The moderation is attributed to several factors: a comparatively mild energy-price environment; a better-than-expected harvest that helped contain food-price spikes; and selective administrative measures such as temporary caps or margin-limiting rules on certain essential goods. At the same time, housing-related costs (rent, utilities and maintenance) have continued to rise slowly, while some services—transport and personal care among them—have adjusted upward, keeping core inflation above headline.

Despite these relatively benign readings by regional standards, the NBS has warned that external shocks could still push inflation back toward the upper edge of its target band of 3% ± 1.5 percentage points. The risks cited include renewed geopolitical tensions in the Middle East, possible disruptions to energy flows, and tighter global financial conditions.

A tight policy corridor remains in place

In response to this balance of progress and risk, Serbia’s central bank has kept its key policy (overnight) interest rate at 5.75% since late 2024. Monetary-policy meetings in March and April 2026 reconfirmed that level.

The deposit-facility rate remains at 4.5% and the lending facility at 7.0%, leaving a corridor that is relatively tight compared with today’s lower inflation environment. The NBS’s message is that it does not automatically cut rates as soon as inflation enters the target range; instead, it aims to preserve a “precautionary” buffer against potential reversals or financial-stability concerns.

This approach aligns with expectations that inflation will remain within the target band over 2026 and into the medium term. The bank points to three pillars behind its forecast: continued monetary restraint via the still-high key rate; supportive regulatory measures—including further efforts aimed at curbing “unfair” trade margins on certain products; and an expectation of a potentially stronger agricultural season that should help stabilize food prices.

With inflation close to but inside target, Serbia effectively positions itself as a higher-yield small-economy anchor in Southeast Europe—supporting foreign-currency and even euro-denominated savings despite modest broader economic growth.

The cost is constrained credit growth

The trade-off for maintaining a policy rate of 5.75% is that borrowing conditions for firms and households remain somewhat constrained. In real terms, conditions have turned only mildly positive in 2026 (nominal rates minus inflation), but they are not yet considered accommodative by investors’ standards.

Commercial-bank lending rates for businesses and mortgages therefore remain relatively high for the region, which can weigh on investment and major consumer purchases such as car loans and housing-related spending.

Authorities and analysts link this cautious stance to both external headwinds—such as slower demand from the European Union and persistently higher global borrowing costs—and domestic vulnerabilities noted from earlier periods, including a still-significant current-account deficit before 2025 and ongoing dependence on imported energy. In effect, Serbia is trading some domestic growth headroom for greater macroeconomic stability and reduced risk of another tightening cycle driven by an inflation rebound.

Rate cuts depend on data—and on wages

Looking ahead, the NBS has indicated that any rate cuts would be data-dependent and gradual. It highlights first-quarter inflation readings and developments in wage settlements as key triggers.

If global inflation continues easing, energy-market tensions stay contained, and domestic wage growth remains aligned with productivity, market expectations point toward slow normalization toward late 2026 or early 2027—but only after price stability is firmly anchored.