National Bank of Romania leaves rates unchanged in July

Hold is in line with expectations: At its meeting on 8 July, the National Bank of Romania (NBR) decided to keep its policy rate at 6.50% for the seventh straight meeting, matching market expectations. The rate remains well above its decade pre-pandemic average of around 3.50%.

Exchange rate stabilizes but inflation remains high, driving the hold: In justifying its decision, the NBR noted that the exchange rate has recently stabilized as domestic political tensions have eased following the presidential elections, reducing the need for a hike to boost FX inflows. That said, a cut was not on the cards given above-target inflation in recent months; moreover, in the coming months, inflation is set to rise well above May’s projections as a result of a higher VAT from 1 August and the expiry of the electricity price capping scheme.

Monetary policy to remain cautious: The NBR did not provide forward guidance on the future direction of interest rates. The vast majority of our panelists expect the NBR to also hold fire at its next meeting on 8 August. However, for rates at year-end, our panel is split: Half of our panelists expect the Bank to stand pat due to the uncertain domestic and international economic situation, while the other half forecasts rate cuts ranging from 25 to 75 basis points, in many cases because the recent fiscal consolidation package is seen notably depressing economic activity. What is sure is that, over the last month, our Consensus has turned more hawkish, with more panelists projecting the Central Bank to stand pat through end-2025. The impact of the fiscal consolidation package, U.S. tariffs and the conflict in the Middle East on domestic inflation and GDP growth are key factors to monitor.

Panelist insight: Commenting on the outlook, ING’s Stefan Posea stated: “All in all, unless the growth outlook deteriorates significantly in the near term, we believe the current cautious policy stance is likely to remain in place at least through the first quarter of 2026. This implies keeping the key rate steady at 6.50% and maintaining a prudent approach to liquidity management. Beyond that point, depending on how the output gap evolves, the NBR might even consider moving preemptively to support growth – potentially before the current inflationary pressures fully subside due to base effects.”

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