BNR: Annual inflation rate to pick up considerably in Romania in following months

   The annual inflation rate in Romania will pick up considerably in the following months, under the transitory impact of the expiry of the electricity price capping scheme and the increase in VAT rates and excise duties starting August 1, thus climbing well above the values indicated by the May 2025 forecast over the short time horizon, according to a press statement released by the National Bank of Romania (BNR) on Tuesday."However, the package of fiscal and budgetary measures to be implemented starting August is, overall, likely to entail stronger underlying disinflationary pressures over the longer horizon, mainly via the effects exerted on aggregate demand, and to support a relatively swift and hefty correction of the current account deficit, with favourable implications for the economy's financing costs and for the behaviour of the leu's exchange rate, also in the period ahead," according to the bank.Uncertainties are, nevertheless, further associated with the additional corrective measures likely to be adopted in the future in order to continue budget consolidation in line with the National Medium-Term Fiscal-Structural Plan agreed with the European Commission and with the excessive deficit procedure.High uncertainties and risks to the outlook for economic activity, implicitly the medium-term inflation developments, continue to arise from the external environment, given the war in Ukraine and the Middle East situation, but especially amid the uncertainty and the potential effects generated by the US trade policy and by the retaliatory measures taken by other countries, affecting the developments in the global economy and in international trade.At this juncture, the absorption and use of EU funds, especially those under the Next Generation EU programme, are essential for partly counterbalancing the contractionary effects of budget consolidation and of geopolitical/trade conflicts, as well as for carrying out the necessary structural reforms, energy transition included.The ECB's and the Fed's monetary policy decisions, as well as the stance of central banks in the region, are also relevant.Based on the currently available data and assessments, as well as in light of the elevated uncertainty, the BNR Board decided in the meeting held today, 8 July 2025, to keep the monetary policy rate at 6.50% per annum. Moreover, it decided to leave unchanged the lending (Lombard) facility rate at 7.50% per annum and the deposit facility rate at 5.50% per annum. Furthermore, the BNR Board decided to maintain the existing levels of minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions.The BNR Board decisions aim to ensure and maintain price stability over the medium term, in a manner conducive to achieving sustainable economic growth. The NBR Board reiterates that, at the current juncture, the balanced macroeconomic policy mix and the implementation of structural reforms, also by using EU funds to foster the growth potential over the long term, are of the essence in preserving a stable macroeconomic framework and strengthening the capacity of the Romanian economy to withstand adverse developments.BNR closely monitors developments in the domestic and international environment and stands ready to use the tools at its disposal in order to achieve the fundamental objective regarding medium-term price stability, while safeguarding financial stability.The next monetary policy meeting of the BNR Board will be held on 8 August 2025.