The National Bank of Serbia (NBS) left its benchmark interest rate unchanged at 5.75% on April 10, marking the seventh consecutive month it has held borrowing costs steady, as policymakers flagged persistent uncertainties in global markets and the need to maintain a cautious monetary stance.

The central bank's Executive Board also held the interest rates on deposit and credit facilities unchanged at 4.5% and 7.0% respectively, the NBS said in a statement following its policy meeting.

"Despite a significant decrease in inflation during 2023, and its stabilisation from mid-2024, it is necessary to continue implementing a prudent monetary policy," the bank said. "Domestic inflation largely depends on developments in global commodity and financial markets, which continue to cause concern due to uncertainty."

Annual inflation in Serbia currently stands at 4.5%, the upper boundary of the central bank's target range. The NBS projects inflation will remain at similar levels until mid-2025 before gradually declining toward the 3% midpoint target in the second half of the year.

The bank said the restrictive effects of monetary policy, an expected average agricultural season and a decline in oil prices based on futures markets should all contribute to easing price pressures. Slower real wage growth and falling import inflation are also expected to help bring core inflation – currently around 5% – closer in line with headline inflation.

The NBS pointed to external risks, including global protectionism and volatile trade policies, as major influences on inflationary pressures.

"On the one hand, the introduction of high tariffs and uncertain trade policies in the coming period worsen the prospects of global economic growth and affect the drop in prices of primary products, primarily oil," the bank said. "But on the other hand, they increase the risks that there could be a stoppage in global supply chains and an increase in global inflation."

The Executive Board also noted that the European Central Bank (ECB) has eased monetary policy in recent months, a move expected to improve borrowing conditions in Serbia, particularly for euro-indexed loans. However, uncertainty surrounding the impact of US tariffs on the eurozone economy may influence future ECB decisions.

The Federal Reserve is expected to remain cautious, with no immediate rate cuts anticipated, the NBS said.

In terms of domestic economic activity, the central bank highlighted a slowdown in the industrial and service sectors in the first months of 2025, following robust GDP growth of 3.9% in 2024, one of the highest in Europe.

"Activity in the processing industry stagnated in January and February, while growth in trade and tourism slowed, especially in February," the bank said, adding that global protectionist trends, disruptions in the European automotive sector and domestic protests had had an impact on investment and consumption.

Nevertheless, the NBS anticipates a rebound in the coming months, supported by increased production in the electric vehicle (EV) and tyre sectors, the activation of new energy capacities and infrastructure projects linked to Expo 2027, set to be held in Belgrade.