Romania keeps policy rate at 6.5% amid “very high uncertainty”

On July 8, Romania’s central bank (BNR), in line with expectations and based on the assessments and data currently available, and amid very high uncertainty, kept the policy rate at 6.5%. The balanced mix of macroeconomic policies and the implementation of structural reforms, including through the use of European funds, to stimulate long-term growth potential are essential for macroeconomic stability and strengthening the capacity of the Romanian economy to cope with adverse developments, BNR warned. Analysts expect no rate change for nearly an entire year. Erste Group expects the key rate to remain at 6.50% until May 2027 (when rate cuts become likely amid headline inflation dropping below the policy rate). “Rate hikes appear unlikely in a weak economy operating with a negative output gap,” the bank's analysts argued. Tighter liquidity management via deposit-taking tenders could lift the effective rate above the current 5.50% deposit facility level, but the bank’s analysts said this is not their base case and would more likely reflect FX concerns rather than renewed inflationary pressures. Erste analysts see year-end inflation at 5.9% y/y (5.6% y/y for CORE2). Further RON depreciation remains an upside risk to the inflation outlook, they warned, although for now EUR/RON has stabilised in a new trading range. Central bank expects inflation to ease – but the starting point is high. The annual inflation rate continued to increase in the first two months of Q2, rising to 10.85% in May, from 9.87% in March. The adjusted CORE2 annual inflation rate interrupted its slow downward trend, increasing slightly in both months, to 8.5% in May 2026, from 8.2% in March, amid second-round effects of fuel prices and currency depreciation, and high short-term inflationary expectations. Base effects in June and particularly Q3, but also fundamental factors (fiscal consolidation), will bring the annual inflation down over the coming quarters. BNR projected the headline inflation to ease at 5.5% y/y at the end of 2026 and 2.9% y/y one year later. The central bank estimates a moderate economic recovery in Q2. After economic activity contracted by 1.9% q/q in Q4 and stagnated in Q1, BNR sees the latest data and analyses as indicating a slight recovery in economic activity in the second quarter of 2026 (also in q/q terms). The recovery would be associated with an increase in its annual dynamics (y/y growth), amid heterogeneous developments in the components of aggregate demand and major sectors. [email protected] (Photo source: Vlad Ispas/Dreamstime.com )