The National Bank of Serbia’s (NBS) key interest rate has remained steady at 5.75% since September last year. Zoran Grubišić, the dean of the Belgrade Banking Academy, told Biznis.rs that it is unlikely there will be a reduction in the rate at today’s meeting.
This view aligns with an analysis published last month by Raiffeisen Bank analysts, following the NBS’s decision to maintain the rate at the same level. The analysts predict that a rate reduction will only occur in the middle of the second quarter. Since the January meeting, the European Central Bank (ECB) and the US Federal Reserve have set their reference rates. While the ECB decided to ease its monetary policy further, the US Fed did not heed President Donald Trump’s calls for a rate change.
Grubišić emphasized that Serbia does not necessarily need to follow either of these signals. However, it is natural for Serbia to align its policy with the ECB. Despite this, he sees no reason for the NBS to adjust the reference interest rate in February, even by a minimal 0.25 percentage points.
Looking at the Eurozone, Grubišić points out that the ECB has announced four planned rate reductions, which are already being implemented. Meanwhile, the US Fed is taking a different approach from Europe’s policy. Grubišić anticipates that at some point Serbia will “follow” the ECB’s signals and lower its key interest rate, but he believes that moment has not yet arrived. He estimates that the likelihood of the NBS lowering the rate in the near future is between 30% and 40%, a solid possibility but not a strong one. Therefore, he predicts the reference interest rate will remain unchanged after the Executive Board’s meeting.
Raiffeisen Bank’s experts have also considered the NBS’s guidance from the January 10 meeting regarding future interest rate trends. The NBS stated that future monetary policy decisions will depend on domestic and international market developments, particularly inflation data. They will also focus on ensuring financial stability and favorable economic growth prospects.
Raiffeisen analysts expect the key interest rate to remain unchanged in the first quarter of 2025 due to persistent high base inflation and still-elevated prices for agricultural products, although they are decreasing. On the other hand, stable exchange rates, weak import inflation, and a slowdown in personal consumption are expected to have a disinflationary effect. The bank maintains its inflation forecast for the end of 2025 at 3.5%, though risks remain due to uncertain agricultural seasons and fluctuating global energy and commodity prices.
According to Raiffeisen’s analysis, the first rate reduction is likely to occur around the middle of the second quarter of 2025. This will likely be driven by a slowdown in base inflation and a narrowing of the interest rate gap between the euro and the dinar. Raiffeisen analysts also note the anticipated significant reduction in the ECB’s interest rate, which could make euro-denominated lending more attractive, while the NBS aims to promote dinar lending.
