NBS leaves rates unchanged in January

Decision in line with market expectations: At its meeting on 12 January, the National Bank of Serbia (NBS) decided to keep the key policy rate at 5.75%, where it has been since September 2024. The decision was in line with market expectations.

Within-target inflation, anticipated GDP acceleration drive decision: The NBS decision to hold rates was driven by inflation staying within its 1.5%-4.5% tolerance band through December and the Bank’s expectation that it will remain there even after domestic trade margin caps expire in March 2026. Meanwhile, the Bank opted against a cut, as it expects GDP growth to accelerate in 2026–2027 and wants to conserve policy space amid persistent geopolitical uncertainty and new systemic laws on merchant practices.

Bank expected to cut later this year: Most of our panelists expect rate cuts of 50–125 basis points from current levels by the end of 2026. However, the Central Bank stated that it will make monetary decisions on a meeting-to-meeting basis due to instability in the international environment. Inflationary risks from U.S. sanctions on oil firm NIS hitting Serbia’s sole refinery should ease once the refinery’s planned sale to Hungary’s MOL is approved, while recent truck blockades across the Balkans are an additional factor to watch. The NBS will meet again on 12 February.

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