11/12/2025
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. After inflation dropped to 2.9% and 2.8% y-o-y in September and October, respectively, the Board expects it 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 this year’s. The increase in disposable income and the low base from September this year will work in the opposite direction. However, we do not anticipate significant inflationary pressures stemming from the rise in disposable income as wage growth is expected to be matched by corresponding gains in productivity. Furthermore, the NBS’s measures to stimulate lending to lower-income citizens are carefully calibrated to avoid excessive credit growth, which could otherwise pose risks to both price and financial stability.
The Executive Board emphasizes that the NBS supports economic growth through the maintained relative exchange rate stability and more favourable credit financing conditions, thanks to the effects of past monetary policy easing, amendments to the Law on the Protection of Financial Service Consumers, and measures aimed at improving borrowing conditions for low-income citizens and young first-time homebuyers. All these factors resulted in double-digit y-o-y growth in lending activity to both corporates and households, which measured 13.1% in October.
The Executive Board underlines that increased caution is still warranted in the pursuit of monetary policy given that the international environment remains complex and unstable. Higher customs tariffs, rising protectionism and the persisting uncertainty of global trade policies, coupled with pronounced geopolitical tensions, continue to dictate developments in global commodity and financial markets, making them extremely volatile and dampening investment and consumer confidence across countries. Concurrently, geopolitical tensions and the growing protectionism could have a direct impact on production and exports of Serbian manufacturing, especially in the segment of oil processing and base metals production. The Board also took into account the current situation in terms of production at the oil refinery and the risks involved if a solution enabling the continuation of production is not found any time soon. As for monetary policy decisions of leading central banks, the Fed continued to trim its key rates, as expected, with the aim of supporting the labour market. In contrast, the ECB is expected to keep its main rates unchanged at least until end-2026, as it has estimated that the inflation target has been reached.
According to SORS data, GDP growth in Q3 measured 2% y-o-y, as envisaged by the preliminary estimate. The structure of growth was consistent with the NBS’s expectations, with growth driven by the services sector and industry, while activity in the construction sector continued to decline. Industrial production in Serbia during October was affected by reduced electricity generation and, within the manufacturing sector, by lower output of petroleum products and related branches. At the same time, growth continued in the production of motor vehicles and rubber and plastic products, as a result of earlier investments in the automotive industry. A weaker than expected economic performance in the year to date reflects dented investment and consumer confidence due to prolonged global uncertainty and socio-political developments in the country, while the rise in disposable income is working in the opposite direction. The Executive Board expects GDP growth of 2.1% in 2025, while next year it should accelerate to 3.5%, with both consumption and fixed investment making positive contributions. However, possible constraints on the production and export of oil and base metals next year, along with stronger effects of trade and geopolitical tensions on consumer and investor confidence, could lead to a lower than projected economic growth.
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 will be held on 12 January.
Governor’s Office
