The November CPI print of 2.80% YoY signals a slight easing from October’s 2.90%, yet remains elevated relative to the 12-month average of 1.90%. This moderation follows a volatile year, with inflation swinging between a low of -1.60% in October 2025 and a high of 4.60% in February 2025. The geographic scope centers on RS’s domestic economy, while temporal analysis highlights seasonal and policy-driven fluctuations over the past 12 months.

Drivers this month

• Shelter costs contributed 0.22 percentage points (pp), reflecting steady housing demand.
• Food prices eased, subtracting -0.10 pp, helped by improved agricultural output.
• Energy prices rebounded modestly, adding 0.15 pp amid global oil price volatility.

Policy pulse

The current CPI reading sits just above the central bank’s 2.50% inflation target, suggesting a cautious stance for monetary policy. The National Bank of RS has maintained a neutral policy rate since September, balancing inflation control with growth support.

Market lens

Immediate reaction: The RSD currency appreciated 0.30% against the EUR within the first hour post-release, while 2-year government bond yields edged up 5 basis points, reflecting mild hawkish repricing.

Core macroeconomic indicators provide context for the CPI trend. RS’s GDP growth slowed to 1.20% YoY in Q3 2025, down from 1.80% in Q2, signaling moderate economic cooling. Unemployment remains stable at 6.50%, while wage growth accelerated to 3.40% YoY, exerting upward pressure on consumer prices.

Monetary Policy & Financial Conditions

The National Bank of RS has kept the policy rate steady at 3.75% since September 2025. Inflation expectations remain anchored near 2.50%, but financial conditions have tightened slightly due to global rate hikes. Credit growth slowed to 4.10% YoY, down from 5.30% six months ago.

Fiscal Policy & Government Budget

Fiscal policy remains expansionary, with the government running a 3.20% of GDP deficit in Q3 2025. Increased infrastructure spending and social transfers support demand but risk fueling inflation if unchecked. The budget outlook anticipates a gradual deficit reduction toward 2.50% of GDP by mid-2026.

Drivers this month

• Energy prices increased 1.20% MoM, reversing a 0.80% decline in October.
• Shelter costs rose 0.50% MoM, consistent with steady housing demand.
• Food prices declined 0.30% MoM, reflecting seasonal harvest gains.

Market lens

Immediate reaction: The RSD strengthened 0.30% versus the USD, while 2-year government bond yields rose 5 basis points, reflecting increased expectations for a potential policy rate hike in early 2026.

Looking ahead, RS’s inflation trajectory depends on several factors, including monetary policy adjustments, fiscal discipline, and external shocks. The base case scenario projects inflation stabilizing near the 2.50% target over the next six months, supported by moderate wage growth and stable commodity prices.

Scenario analysis

• Bullish (20% probability): Inflation falls below 2.00% by Q2 2026 due to stronger currency appreciation and subdued wage growth.
• Base (60% probability): Inflation remains near 2.50%, with balanced monetary policy and steady fiscal spending.
• Bearish (20% probability): Inflation rises above 3.50% if energy prices surge or fiscal deficits widen unexpectedly.

External shocks & geopolitical risks

Global energy market volatility and geopolitical tensions in Eastern Europe pose upside risks to inflation. Supply chain disruptions could also pressure food and manufacturing prices, complicating the inflation outlook.

RS’s November CPI data highlights a cautiously optimistic inflation environment. While the slight moderation from October is encouraging, persistent pressures from energy and shelter costs warrant vigilance. Monetary authorities face a delicate balancing act between supporting growth and containing inflation. Fiscal policy must also remain disciplined to avoid fueling price pressures. Financial markets have priced in a modest tightening cycle, reflecting confidence in policy frameworks but sensitivity to external shocks.

Structural & long-run trends

Long-term inflation in RS has averaged around 2.30% over the past decade, with recent volatility linked to commodity price swings and exchange rate fluctuations. Structural reforms aimed at improving productivity and market competition could help anchor inflation expectations and reduce volatility over time.

Inflation vs. RSDUSD Exchange Rate Since 2020

Since 2020, RS’s CPI and the RSDUSD exchange rate have shown a moderate inverse correlation of -0.45. Periods of rising inflation often coincide with RSD depreciation, reflecting concerns over purchasing power. Notably, the sharp inflation spike in early 2025 aligned with a 3.50% RSD depreciation against the USD. This relationship underscores the importance of inflation control for currency stability.

FAQs

What does the November 2025 CPI reading indicate for RS’s economy?

The 2.80% YoY CPI suggests moderate inflation, slightly easing from October but still above the central bank’s target, signaling cautious optimism.

How does the CPI affect monetary policy in RS?

Inflation near 2.50% supports a neutral monetary stance, but persistent upward pressures may prompt rate hikes to anchor expectations.

Why is monitoring CPI important for investors?

CPI influences interest rates, currency values, and asset prices, making it a key indicator for investment decisions and risk management.

Takeaway: RS’s November CPI print signals a fragile but manageable inflation environment, requiring balanced policy action amid external uncertainties.