NBS leaves rates unchanged in December

NBS holds for third consecutive meeting: At its meeting on 12 December, the Executive Board of the National Bank of Serbia (NBS) decided to maintain the key policy rate at 5.75% and rates on the deposit and lending facilities at 4.50% and 7.00%, respectively. The decision marked the third successive hold and aligned with market expectations.

Central Bank maintains wait-and-see approach: The Bank reiterated that it had cut rates by 75 basis points since June and stated that the effects of these reductions had yet to be fully transmitted through the economy. Moreover, it determined that a cautious monetary policy stance was required “given the uncertainty in the international environment”. Meanwhile, the Bank noted that inflation has stayed within its 1.5–4.5% target since May—despite hitting its upper bound in October—though it highlighted that core inflation remained above target. Lastly, the NBS said that it expects price pressures to soften ahead due to still-tight monetary policy and lower imported inflation.

NBS to cut rates in 2025: The NBS did not provide explicit forward guidance on the future direction of interest rates. Instead, it reiterated that it will closely monitor and analyze domestic and international market developments. Our Consensus is for the Bank to resume its monetary policy easing cycle in 2025, with some panelists seeing cuts as soon as Q1. The Bank is set to reconvene on 10 January.

Panelist insight: Mate Jelic, analyst at Erste Bank, commented: “It seems likely that NBS will remain cautious in January as well, opting to wait and see what the new US administration puts in motion, given that possible introduction of tariffs could lead to higher global inflation. With expected gradual easing of inflation later in the year and de-escalation of geopolitical conflicts, overall global policy uncertainty should drop as well allowing for further key rate cuts. We expect a total of 100bp cuts in 2025, although risks are tilted towards less rather than more cuts.”

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