Central Bank leaves rates unchanged in March

Bank stands pat, as expected: At its meeting on 12 March, the National Bank of Serbia (NBS) decided to maintain the policy interest rate at 5.75%, where it has been since September 2024. The decision was in line with market expectations.

Heightened uncertainty drives decision: The Central Bank’s decision was largely driven by current and expected inflation dynamics. Inflation continued to ease in January–February from Q4, while remaining within the Bank’s 1.5–4.5% target, notably due to Decree on Special Conditions for Trade in Certain Types of Goods, which caps wholesale and retail trade margins. Still, the NBS held fire, instead of cutting, as it deemed a more cautious stance necessary amid uncertainty over the impact of the U.S.-Iran war on energy prices.

Bank to cut ahead, but uncertainty clouds the outlook: The majority of our panelists continue to expect policy rate cuts of 50–125 basis points from current levels by the end of 2026, while the remainder foresee rates remaining on hold. Although wage growth and a base effect from the introduction of margin caps in September 2025 will add to price pressures, inflation is projected to remain within the 1.5–4.5% target range through end-2026. However, persistently higher energy prices linked to the U.S.-Iran war pose an upside risk. The next meeting is scheduled for 9 April.

Panelist insight: Commenting on the outlook, Mate Jelic, analyst at Erste Bank, stated: “In our read, the bar for near-term easing has therefore risen. Rate cuts are still possible later in 2026, but they become materially more data-dependent on whether the energy spike reverses quickly versus persists and feeds into core inflation and inflation expectations. We have adjusted our expectations to the current reality, and moved to just one 25bps cut in 2026, most likely delivered in July, compared to three cuts expected earlier.”

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