The National Bank of Serbia’s Executive Board raised its key policy rate by 25 basis points to 6%, tightening monetary conditions to limit the spread of higher energy costs to other prices. The deposit and lending facility rates also increased to 4.75% and 7.25%, respectively. Persistently elevated energy prices linked to the Middle East conflict are increasing the risk of broader effects on production costs, inflation expectations and wages.
Annual inflation reached 4.1% in September, primarily reflecting a low comparison base for food and household chemical products previously subject to margin caps. Petroleum product prices rose more than 17% annually, although fuel excise reductions limited the increase. High energy and other commodity prices, imported inflation and food price base effects are expected to push inflation above the 4.5% upper bound of the target tolerance band in 2027. Inflation is projected to return within the band by the end of 2027 and subsequently converge toward the 3% target midpoint.
The 2026 economic growth forecast was raised to at least 3.5%, following a flash estimate of 4.0% growth in the third quarter. The 2027 forecast was lowered to 4.0%, reflecting the higher 2026 comparison base, lingering geopolitical tensions and rising global energy prices. Consumption and investment are expected to remain the main growth drivers, supported by rising disposable income and infrastructure projects. The next rate meeting is scheduled for Dec. 10.