NBS: Tabakovic signals rate direction ahead of 12 June meeting

National Bank of Serbia Governor Jorgovanka Tabakovic signalled at the Kopaonik Business Forum panel on 28 May that there is room to cut the reference rate. The current level of 4.75% has held since the February Executive Board meeting.

The next meeting is scheduled for 12 June 2026. Markets expect a 25 basis point move that would take the reference rate to 4.50%.

Where inflation stands

The annual inflation rate, according to Statistical Office of the Republic of Serbia data for April, stood at 3.8%. That kept it within the NBS target band, which covers a range of 1.5% to 4.5% with the central point at 3%.

The indicators feeding into the decision:

• Core inflation (excluding food and energy) in April: 4.2% year on year
• Industrial producer price index: 1.9% year on year
• Financial sector inflation expectations one year out: 3.4%
• EUR/RSD rate stable in the 117.15 to 117.28 range since January

Exchange rate stability gives the monetary authority room to pick the pace without FX market pressure.

Tabakovic on the next move

The Governor told reporters after the panel that the decision is set by a basket of quantitative criteria, not by forcing a direction.

The direction of the Executive Board decision is set by inflation projections for the next four quarters and by the path of inflation expectations, where at this point the assessment shows that room for a symmetric calibration is open.

Tabakovic stressed the IMF Stand-by Arrangement conditions.

The pace of monetary easing is consistent with the criteria of the IMF Stand-by Arrangement, which requires the real interest rate not to fall below one percentage point on a quarterly average.

The current real rate, on the NBS calculation, stands at 0.95 percentage points. A 25 basis point cut would hold it above the programme threshold, since the second quarter inflation projection shows a fall to 3.5%.

What it means for loans and savings

A reference rate cut to 4.50% would feed into the cost of new dinar loans and dinar deposit yields. Current averages, based on NBS data for April:

• Average rate on new dinar cash loans: 11.3% per year
• Average rate on new dinar mortgage loans: 6.4% per year
• Average rate on dinar term deposits over 12 months: 3.8% per year
• Rate on euro-indexed mortgage loans: 4.9% per year (tied to the six-month EURIBOR at 2.1%)

A 25 basis point NBS reference rate cut typically feeds through 0.15 to 0.20 percentage points to new cash loans within 60 days. Mortgage loans react more slowly, with a 0.05 to 0.10 percentage point move within 90 days.

Is a series of cuts coming by year-end

Market projections, based on an Erste Group Research report dated 26 May, point to two cuts by the end of 2026. That would take the reference rate to 4.25% by the October meeting.

The Erste Group Research chief economist, Branko Vajdic, quantified the call.

Our base projection sees two NBS reference rate cuts in the second half of 2026, with a cumulative 50 basis point adjustment, which would bring the level to 4.25 percent by October, provided core inflation continues to converge to target.

The next step is the publication of the new inflation report, which the NBS releases on 11 June. That is when the final decision on the next day’s meeting takes shape.

Would a combination of a cut by the NBS and the ECB decision, also scheduled for 5 June, put extra pressure on the dinar rate?