National Bank of Serbia reports May inflation at 3.5 percent and projects a temporary move above target late in 2026

The National Bank of Serbia published an update on inflation showing that annual inflation rose to 3.5 percent in May from 3.3 percent in April, mainly because of continued increases in petroleum product prices. Consumer prices increased 0.3 percent month on month, with the largest contribution coming from goods and services within core inflation and from fuel prices. Annual core inflation remained relatively stable at 4.5 percent. Food prices had an almost neutral effect on monthly inflation overall. Unprocessed food prices fell 0.6 percent in May, driven by lower prices for fresh vegetables and meat, while processed food prices rose 0.4 percent. Compared with a year earlier, food and non-alcoholic beverage prices were down 1.5 percent on average. Energy prices increased 0.8 percent on the month and their annual growth rate accelerated to 10.3 percent, again reflecting higher petroleum product prices. Under the current projection, inflation is expected to stay within the target band until September, then move slightly above the upper bound at the end of 2026 and the start of 2027. The Bank links that temporary overshoot to higher global oil and other primary commodity prices and to a low base from September 2025, when wholesale and retail trade margins had been capped at 20 percent. Assuming the current energy shock is temporary, inflation is then expected to slow, return to the target band in mid-2027, and remain there through the end of the projection horizon.