NBS retains key policy rate at 5.75 pct

BELGRADE - The National Bank of Serbia (NBS) Executive Board decided on Thursday to keep the key policy rate at 5.75 pct, and also kept the deposit facility and lending facility rates at 4.5 and 7.0 pct, respectively.

"In making this decision, the Executive Board primarily took into account actual and expected inflation, as well as risks from the international environment that could affect its trajectory," the NBS said in a statement.

"Y-o-y inflation remained within the target tolerance band (3.0±1.5 pct), reaching 3.5 pct in May, in line with the Executive Board’s expectations, largely owing to the increase in global oil prices and the consequent rise in domestic petroleum product prices during that period.

The increase in petroleum product prices stemming from higher global oil prices was partly mitigated by government measures, i.e. a reduction in fuel excise duties and the release of fuel from state reserves to supply the domestic market. The Board notes that food prices have recorded a y-o-y decline since November 2025, amounting to 1.5 pct in May 2026, and that, even three months after the expiry of the decree capping retail trade margins, there have been no significant price adjustments for the products previously covered by that measure. Given the favourable agricultural season to date and the fruit and vegetable yields, the prices of unprocessed food could exert a favourable (disinflationary) effect on inflation. Core inflation has remained relatively stable, hovering around the upper bound of the target tolerance band for headline inflation," it said.

"The Middle East conflict remains one of the principal sources of global uncertainty, although tensions eased for a time following the agreement on a ceasefire during negotiations aimed at bringing the conflict to an end. This was accompanied by a decline in global oil prices over the preceding month.

Most central banks assess that the scale and duration of the conflict, as well as the time required for the normalisation of flows, call for a cautious approach to monetary policy conduct and the maintenance of its restrictive stance. The ECB raised its interest rate by 0.25 pp in June, to 2.25 pct, after inflation in the euro area reached 3.2 pct in May, and prior to the release of the June reading of 2.8 pct. This decision was taken with the assessment that the rate increase is necessary to bring inflation back to the 2 pct target in 2027. The Fed did not change the range of its federal funds rate in June.

The NBS Executive Board will continue to carefully monitor geopolitical developments, movements in commodity and financial markets, the evolution of trade relations and the moves of leading central banks," the central bank also said.