NBS keeps key policy rate at 5.75 pct

BELGRADE - The National Bank of Serbia (NBS) Executive Board decided on Monday to keep the key policy rate at 5.75 pct and also kept the deposit facility and lending facility rates unchanged at 4.5 pct and 7.0 pct, respectively, the central bank said in a statement.

"The Board made the decision primarily in view of actual and expected inflation, as well as factors from the domestic and international environment affecting its movements. In the final months of 2025, inflation stabilised slightly below the NBS target midpoint (3±1.5 pct)," it said.

"The Board expects inflation to continue trending around the target midpoint until March 2026, i.e. as long as the Decree on Special Conditions for Trade in Certain Types of Goods - which caps wholesale and retail trade margins - is in force. Inflation is anticipated to continue moving within the 3±1.5 pct target tolerance band even after the expiry of the Decree, until end-2026 and in the medium run. This should be facilitated by the announced adoption of systemic laws that will curb unfair merchant practices, as well as by the easing of cost-push pressures from the international environment, and the onset of a new agricultural season, assuming that it turns out better than last year’s. The increase in disposable income and the low base from September last year will work in the opposite direction. However, we do not anticipate any major inflationary pressures stemming from the rise in disposable income as wage growth will be accompanied by gains in productivity. Furthermore, the NBS measures to stimulate lending to lower-income citizens are calibrated to avoid excessive credit growth, which could negatively affect price and financial stability. Moreover, the NBS supports macroeconomic stability and economic growth by the maintained relative stability of the exchange rate.

The Board stresses that heightened caution in the conduct of monetary policy remains necessary given the ongoing instability in the international environment. Geopolitical tensions, coupled with a more stringent tariff policy, mounting protectionism and financial markets’ high sensitivity to public debt sustainability in some of the advanced economies, dent investment and consumer confidence globally, negatively impacting global growth prospects. Concurrently, geopolitical tensions and rising protectionism may significantly impact production and exports of the domestic manufacturing industry in the segment of oil processing and base metals production. As for monetary policy decisions of leading central banks, Fed’s projections published after the December meeting indicate that this year as well we may expect further lowering of the federal funds rate target range, while the ECB will likely keep its key rates on hold by end-2026, as it is estimated that the inflation target has been achieved," it also said.