Over a longer horizon, however, the central bank sees “increasingly obvious underlying disinflationary pressures”, primarily from aggregate demand.
According to the BNR’s latest assessment, annual inflation is expected to follow an upward trajectory through the end of 2026, mainly due to anticipated increases in fuel, energy and other commodity prices, including agri-food products, amid the prolonged Middle East conflict and this year’s severe drought. Developments in the leu’s exchange rate are another source of inflationary pressure.
The central bank’s updated inflation forecast will be released after its November 12 meeting.
Erste Group expects the key rate to remain at 6.5% at least until May 2027, as core inflation remains sticky. It forecasted that core inflation will return to the BNR’s target range only in the fourth quarter of 2027. Rate hikes also appear unlikely, unlike in some other economies, given Romania’s deeply negative output gap.
Romania’s headline inflation eased to 6.17% y/y in August, partly reflecting base effects following double-digit rates in the first half of the year. The BNR’s latest published forecast, issued in August, envisaged inflation at 6.1% at the end of 2026, falling to 3.8% y/y one year later.
Erste said after the latest monetary policy meeting that it planned to raise its year-end inflation forecast from 6.4% to 6.9%, unless September’s reading differs substantially from its expectation of 6.6% y/y. The BNR’s August projection had envisaged inflation of 5.9% y/y in September.
On economic growth, the BNR expects positive quarterly growth in Q3, although annual GDP growth is likely to remain negative. The latest data and analyses pointed to an improvement in economic activity compared with the previous quarter, partly reflecting agricultural performance, but also to weaker annual GDP dynamics, with broadly similar developments across the main components of aggregate demand and major economic sectors.
Fiscal policy and the Middle East conflict pose risks to the inflation and growth outlook.
The central bank highlighted considerable uncertainty surrounding its updated inflation outlook, particularly regarding potential measures to continue fiscal consolidation beyond 2026 in line with the National Medium-Term Fiscal-Structural Plan agreed with the European Commission and the excessive deficit procedure.
The Middle East conflict and the associated energy crisis also pose significant risks to economic activity and medium-term inflation. Their effects could be transmitted through consumer purchasing power and confidence, as well as companies’ activity and profitability. The impact on European and global growth and inflation, alongside changes in risk perceptions towards the region, could also affect Romania’s financing costs.
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