BNR reports slight decline in June's annual inflation rate, forecasts sharp decrease in Q3

  The National Bank of Romania (BNR) reports a slight decline in annual inflation in June and expects a substantial decrease in the third quarter of 2026, as the effects of removing the electricity price cap and increasing VAT and excise rates fade."According to current assessments, the annual inflation rate eases slightly in June, and in the third quarter of 2026 it will record a substantial decrease, as previously anticipated, due to the exhaustion of the direct effects of removing the electricity price cap and of raising VAT and excise rates. At the same time, increasingly evident disinflationary pressures are expected over a more distant horizon from fundamental factors, particularly from aggregate demand, against the background of the fiscal correction initiated in 2025 and continued this year, with favourable implications for inflation expectations and likely to lead to a further adjustment of the current account deficit. However, major uncertainties remain associated, including in the current domestic political situation, with potential future measures aimed at continuing fiscal consolidation beyond the current year, in line with the medium-term budgetary-structural plan agreed with the European Commission and the excessive-deficit procedure," the BNR states.The central bank also highlights significant risks and uncertainties from the Middle East conflict and the global energy shock, affecting purchasing power, business confidence, corporate activity and profits, European/global inflation trends, as well as the perception of risk towards the region, with an impact on financing costs.BNR stresses that full absorption of EU funds, especially under NRRP, is essential to offset fiscal-consolidation and geopolitical pressures and to support structural reforms, including the energy transition. ECB and Fed decisions and regional central-bank stances remain relevant.At its meeting on July 8, 2026, the BNR Board decided to maintain the benchmark interest rate at 6.50%, the lending facility interest rate (Lombard) at 7.50%, and the deposit facility rate at 5.50%, while also keeping the minimum reserve requirement ratios on both RON- and foreign currency-denominated liabilities of credit institutions unchanged.