Romania: Interest rates remain at highest level in the EU in July
National Bank of Romania holds rates again: At its meeting on 8 July, the National Bank of Romania (NBR) maintained its restrictive policy stance, keeping the NBR reference rate at 6.50%—the highest in the EU. The hold was the 15th consecutive and had been penciled in by markets.
NBR balances weak economy with high inflation: The NBR stood pat, as inflationary pressures remained too strong to justify easing, while weak economic activity undercut the case for further tightening. The Bank opted against a hike, as slowing domestic demand, weaker consumption and fiscal consolidation are expected to generate disinflationary pressures in Q3, but refrained from cutting rates due to still-elevated headline and core inflation—headline inflation came in above 10% in April–May—exchange-rate risks, energy price uncertainty and fiscal policy concerns. Instead, the NBR adopted a wait-and-see approach, likely keeping policy restrictive until inflation shows a sustained decline.
NBR seen remaining cautious ahead: The NBR did not provide explicit forward guidance on future interest rate moves. Still, most panelists expect the Bank to keep rates unchanged through year-end, with only a minority seeing scope for a modest cut. The outlook remains highly dependent on the pace of disinflation, with energy price volatility, further leu depreciation, fiscal policy uncertainty and geopolitical instability posing upside risks. A weaker-than-expected economy could strengthen the case for easing, but persistent inflation pressures and uncertainty around fiscal consolidation are likely to keep the NBR cautious. The Bank will reconvene on 10 August.
Panelist insight: Erste Bank’s Vlad Ionita said:
“We expect the key rate to remain at 6.50% until May 2027. Rate hikes appear unlikely in a weak economy operating with a negative output gap. Tighter liquidity management via deposit-taking tenders could lift the effective rate above the current 5.50% deposit facility level, but this is not our base case and would more likely reflect FX concerns rather than renewed inflationary pressures.”