Key policy rate kept on hold
Central bank: nbs | Type: statement | Date: 2026-01-12

At its meeting today, the NBS Executive Board voted to keep the key policy rate at 5.75%. It also kept the deposit facility (4.5%) and lending facility (7.0%) rates unchanged.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%).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% 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.According to the SORS estimate, real GDP growth in 2025 equalled 2.0%, almost fully in line with the NBS November projection. The growth was led by service sectors and the industry, despite the problems in the production of petroleum products since October and thanks primarily to expanded production capacities in the automobile industry, while a decrease was recorded in construction and, to a lesser extent, in agriculture. Mostly owing to the good performance of the automobile industry, goods exports posted 8.0% growth, according to the SORS estimate, while goods imports rose by 7.3%, reflecting continued imports of intermediate goods and equipment, as well as higher imports of consumer goods owing to higher disposable income. Disposable income has been rising primarily thanks to real growth in the average wage of 7.1% in 2025, followed by a pensions increase and more favourable credit conditions, including a double-digit rise in loans for consumption. The Executive Board expects GDP growth acceleration both this and next year, with both consumption and fixed investment making positive contributions, on the back of investments planned under the "Leap into the Future - Serbia Expo 2027" programme. In 2027, owing to the Expo taking place, net exports will also generate a positive contribution.The Executive Board will continue to follow and analyse developments in the domestic and international markets and make monetary policy decisions on a meeting-to-meeting basis depending on the incoming data, the outlook for inflation and its key factors, and the assessment of the effects of adopted monetary policy measures. In making its decisions, the Board will remain mindful of the preservation of financial stability and favourable growth prospects.The next rate-setting meeting, where economic developments will be discussed, will be held on 12 February 2026.