Serbia: NBS leaves rates unchanged in May
Central Bank holds again: At its meeting on 9 May, the National Bank of Serbia (NBS) Executive Board kept its key policy rate unchanged at 5.75%, where it has stood since September 2024. The decision was in line with market expectations.
NBS opts for caution amid external economic uncertainty: The Central Bank noted that inflation has retreated significantly to within the 1.5–4.5% target range. Moreover, it expects inflation to soften further in the coming months due to a still-tight monetary stance, lower oil prices and a healthier agricultural season. Nonetheless, the Bank opted to stand pat due to volatility in commodity and financial markets and the uncertain trade policies of world-leading economies, which could impact inflation and economic growth.
Central Bank to cut rates ahead: The NBS did not provide explicit forward guidance, saying instead that it would continue to closely monitor domestic and international markets. Our Consensus is for the Bank to reduce rates by around 75 basis points by the end of 2025, with multiple panelists expecting the first rate cuts at the next meeting on 12 June.
Panelist insight: Mate Jelic, analyst at Erste Bank, sits at the hawkish end of our panel:
“If inflation develops according to forecasts, meaning [it] starts to drop towards the mid-point of the target range in the next few months, it will make sense to start easing monetary policy again, but pinpointing the exact timing is exceedingly difficult in the current hectic global surrounding. Our base case is [that the] NBS will deliver the first cut in July, as we expect inflation under 4% y/y by then. However, given turbulent […] global and local developments, we expect the central bank will remain relatively cautious, delivering only two cuts in 2025.”