Romania\u2019s central bank (BNR) decided, at its April 7 board meeting, to maintain the monetary policy rate at 6.5%, noting disinflationary pressures from aggregate demand following the renewed decrease in annual GDP dynamics in Q1, as well as inflationary effects from the Middle East crisis, which is expected to spur higher inflation in Q2.\u00a0<\/p>\n
The annual inflation rate continued to decrease slowly in the first two months of 2026, reaching 9.31% in February from 9.69% in December 2025. In turn, the annual adjusted CORE2 inflation rate halted its rise at the beginning of the year, posting a small drop in the first two months as a whole, to 8.3% in February 2026 from 8.5% in December 2025. The inflation forecast, dated before the Middle East conflict began, envisages 3.9% year-end inflation after base effects dissipate through H2.<\/p>\n
According to BNR\u2019s assessments announced following the April 7 meeting, the annual inflation rate will step up in Q2 this year to higher-than-previously-anticipated levels, mainly following the influences expected to stem from costlier fuels, amid the considerable rises in oil and natural gas prices in the context of the Middle East war.<\/p>\n
A combination of\u00a0internal uncertainties<\/em> related to the continuation of the fiscal consolidation\u00a0and\u00a0external uncertainties and risks<\/em> related to the Middle East developments with subsequent effects on the dynamics of economies and inflation in Europe\/worldwide and the risk perception towards the region, with an impact on financing costs, <\/strong>leads to the idea that the expectations for a rate cut should be put on ice temporarily until more clarity is achieved. This is particularly highlighted by BNR, which emphasizes its decisions aimed to ensure and maintain price stability over the medium term, also conducive to achieving sustainable economic growth.\u00a0<\/p>\n Erste Group, in a research note, mentioned the scenario of rate hikes, seen as still unlikely, yet a scenario not on the analysts\u2019 agenda before the Middle East crisis. With the short-term inflation outlook shifting upward (Erste revised year-end inflation forecast to 5.1% from 4.6%), the Austrian group\u2019s analysts expect the BNR to contemplate its first rate cut no earlier than the final meeting of the year, scheduled for November, which will coincide with an updated forecast. Such a time horizon is quite remote, given the intense developments on both domestic (political, fiscal) and external (Middle East) fronts.<\/p>\n The most relevant paragraphs of the BNR\u2019s press release relate to the short-term macroeconomic indicators converging to expectations for further negative y\/y economic growth despite some progress compared to Q4 last year; short-term inflation profile being shaped by Middle East developments (Q2) and base effects (H2) as well as long-term fiscal consolidation (via aggregate demand); and a complex blend of internal uncertainty and external uncertainty and risks.\u00a0<\/p>\n The latest data and analyses point to a slight recovery in economic activity in 2026 Q1 compared to the previous quarter, associated, however, with a renewed decrease in the annual GDP dynamics amid relatively similar developments across the aggregate demand components and major sectors.<\/p>\n Specifically, in January 2026, retail sales and the volume of services to households witnessed a markedly stronger annual decline, while the annual dynamics of the volume of construction works continued to decrease swiftly, posting a moderate return to negative territory. At the same time, industrial output saw a significantly larger year-on-year contraction, while the annual change in the exports of goods and services visibly narrowed its positive gap against that in imports, reporting a relatively more pronounced decline from 2025 Q4 and thus moving into negative territory. However, in January 2026, the trade deficit saw a steeper contraction in annual terms, and the current account deficit accelerated even faster in its decline, given the improvement in the secondary income balance.<\/p>\n According to current assessments, the annual inflation rate will step up in the period from March to June 2026 to higher-than-previously-anticipated levels, mainly following the influences expected to stem from costlier fuels, amid the considerable rises in oil and natural gas prices in the context of the Middle East war. They will overlap the unfavorable base effects that will be manifest in 2026 Q2 in the energy segment, as well as the transitory direct effects exerted since 2025 H2 by the expiry of the electricity price capping scheme and by the increases in VAT rates and excise duties, which will dissipate in 2026 Q3 and thus entail an abrupt downward correction of the annual inflation rate.<\/p>\n At the same time, the progress in the budget correction initiated in 2025 is likely to strengthen in the future the underlying disinflationary pressures, especially from aggregate demand, with favourable implications for inflation expectations as well, and lead to the further adjustment of the current account deficit.<\/p>\n Uncertainties are, nevertheless, still associated with the measures likely to be adopted in the future in order to continue budget consolidation beyond this year in line with the National Medium-Term Fiscal-Structural Plan agreed with the European Commission and with the excessive deficit procedure.<\/p>\n High uncertainties and risks to the outlook for economic activity, implicitly the medium-term inflation developments, arise however from the Middle East war and the ongoing global energy crisis,<\/strong> via the effects potentially exerted, through multiple channels, on consumer purchasing power, as well as on firms\u2019 activity and profits, also by affecting the dynamics of economies and inflation in Europe\/worldwide and the risk perception towards the region, with an impact on financing costs.<\/p>\n At this juncture, the absorption and use to the maximum of EU funds, especially those under the NRRP, are essential\u00a0for partly counterbalancing the contractionary effects of budget consolidation and of the Middle East conflict, as well as for carrying out the necessary structural reforms, energy transition included.<\/p>\n