Serbia Raises Key Rate to 6% as Inflation and Loan Costs Come Under Pressure

Serbia Raises Key Rate to 6% as Inflation and Loan Costs Come Under Pressure
The National Bank of Serbia raised its key interest rate from 5.75% to 6% at its November 12 meeting, tightening monetary conditions as inflation remained near the upper end of the target range. The deposit facility rate was increased to 4.75%, while the lending facility rate rose to 7.25%.

The NBS said the decision was based on actual and expected inflation, as well as domestic and international risks. It specifically pointed to prolonged uncertainty in global energy markets, including higher prices for oil, gas and electricity, and said the increase was intended to prevent energy-related shocks from spreading to other prices.

Economist Ivan Nikolić described the move as a limited tightening designed to keep inflation within the planned range for the year. Annual inflation reached 4.4% in October and could remain near the upper boundary of the target, he said. “For those indebted in dinars, it will mean a somewhat higher cost, depending on the terms and maturity of their loans, but not to the extent that it would in any way undermine their standard of living.”

Nikolić said the policy was also meant to bolster confidence and slightly reduce demand, following moves by the European Central Bank and the U.S. Federal Reserve. The NBS similarly called the increase an “adequate and timely measure” to preserve price stability over the medium term.

Dušan Uzelac, editor of the Kamatica finance portal, offered a more direct warning for borrowers. He said banks would face higher funding costs, eventually making future borrowing more expensive. The effect, he estimated, would appear over three to six months and apply to new dinar loans rather than existing ones. Uzelac also said the decision was unrelated to developments at Alta Bank or Serbia’s elections, describing it instead as part of the NBS’s regular monetary management.