There is a consensus among analysts on expectations for no change in the Romanian central bank’s monetary policy rate (6.5% currently), despite the expected slow economy, until at least the first quarter of 2026. More insights are expected from the August Inflation Report, which should reflect the monetary authority’s expectations for the impact of the fiscal and budgetary reform packages – primarily the VAT rate hike – and the July energy market liberalisation.
The National Bank of Romania (BNR) has a monetary board meeting scheduled for August 8.
The fiscal measures should keep BNR on hold at least until the first quarter of 2026, Erste Group said in a research note ahead of the meeting. The financial group expects the BNR’s press release to mention the upward revision in the short-term inflation outlook, which will be presented at the Inflation Report press conference.
Erste Group forecasts headline inflation at 7.5% by yearend, assuming a rather moderate increase in electricity prices in July of about 30%, 60% pass-through from VAT hikes, and 100% pass-through of the increase in excise duties. The financial group sees the core inflation at 6.5% y/y at the end of 2025.
Despite the fact that the economy is likely to continue to grow well below potential over the next four quarters, Erste Group doesn’t expect rate cuts until there is more clarity on the inflation outlook and a high degree of confidence that inflation will reach the target range over the policy horizon. This is unlikely to happen earlier than the February 2026 Inflation Report, when we may see the first cut after a long pause.
ING Romania also expects BNR to keep its policy unchanged at 6.50% at its August 8 meeting.
Recent fiscal changes have added some predictability to economic policy, but they also bring new inflation risks, analysts of the bank explains in a report. The liberalised electricity prices from July 1, plus higher VAT and excise duties in August will push inflation into the high single digit area in the coming months, according to their forecast. June inflation already surprised on the upside, and ING Romania sees year end inflation at 7.9%, with a peak above 8.0% in September–October.
The bank’s expectations, therefore, remain unchanged: no cuts until at least the first quarter of 2026, with some easing possible from the second quarter if disinflation is on track.
In the second half of 2026, strong base effects and softer demand should bring inflation back towards the 4.0 % area.
On the foreign exchange front, ING Romania sees more flexibility from the central bank and continuous pressures from the wide current account deficit, with the yearend target exchange rate at RON 5.1 to EUR.
The RON remains significantly overvalued, and in recent weeks, ING Romania stresses, adding that the market has seen that the upward pressure on EUR/RON is still there. Understandably, the massive current account deficit will continue to weigh on the currency while markets continue to keep a close eye on the execution of fiscal consolidation.
Therefore, ING Romania leaves RON 5.100/EUR in its forecast for the end of the year as room to move up after the inflation peak if the situation remains stable.
iulian@romania-insider.com
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