Minutes of the monetary policy meeting of the National Bank of Romania Board on 15 May 2026

Published on: 27.05.2026   The National Bank of Romania Board members present at the meeting: Mugur Isarescu, Chairman of the Board and Governor of the National Bank of Romania; Leonardo Badea, Vice Chairman of the Board and First Deputy Governor of the National Bank of Romania; Cosmin Marinescu, Board member and Deputy Governor of the National Bank of Romania; Aura-Gabriela Socol, Board member; Roberta-Alma Anastase, Board member; Csaba Bálint, Board member; Cristian Popa, Board member.   During the meeting, the Board discussed and adopted the monetary policy decisions, based on the data on and analyses of recent macroeconomic developments and the medium-term outlook submitted by the specialised departments, as well as on other available domestic and external information.   Looking at the recent developments in inflation, Board members pointed out the rise posted by the 12-month inflation rate in March, causing the indicator to reach 9.87 percent at the end of 2026 Q1 from 9.69 percent in December 2025, given that the impact exerted by the pronounced pick-up in fuel prices amid the Middle East war and the moderate renewed acceleration in the dynamics of VFE prices and tobacco product prices had outweighed somewhat the effects stemming from the notable drop in natural gas and electricity prices, as well as from the slight deceleration in core inflation.   It was noted that the annual adjusted CORE2 inflation rate had entered a mildly downward path at the beginning of 2026, falling to 8.2 percent in March from 8.5 percent in December 2025, almost entirely on account of the dynamics of processed food sub-component, which had embarked on a downward trajectory after six quarters of increase.   Following the assessments, it was concluded that the slight deceleration in core inflation reflected mainly influences stemming from disinflationary base effects and the decrease in some agri-food commodity prices and the import price dynamics, being attributable to a small extent to the widening of the aggregate demand deficit and the weakening of consumer demand.   During the discussions, Board members referred to the slowdown posted in 2026 Q1 as a whole by the annual dynamics of industrial producer prices for consumer goods after a continuous rise for five quarters, but also to the firms’ and consumers’ high short-term inflation expectations, which had increased significantly in March-April 2026, thus fully offsetting a five-month decline. At the same time, it was shown that financial analysts’ longer-term inflation expectations had seen only a marginal drop in March and April after climbing again to the vicinity of the upper bound of the variation band of the target in February, whereas the consumer purchasing power had continued to weaken in Q1 overall, reflecting the slower growth in household income and the elevated annual inflation rate.    At the same time, it was remarked that according to the recent data the annual inflation rate had risen to 10.71 percent in April 2026, mainly as a result of significant increases in the dynamics of natural gas, fuel and administered prices, amid unfavourable base effects and the rise in oil prices, but also under the impact of a sizeable upward adjustment in rents for state-owned housing.   As for the cyclical position of the economy, Board members cited the quarterly contraction in economic activity during 2025 Q4, entailing a more visible widening in the aggregate demand deficit over that period compared to expectations. At the same time, it was pointed out that the annual GDP growth had slowed to 0.2 percent in the last three months of 2025 from 1.7 percent in Q3 chiefly following the decline in household consumption versus the same year-earlier period, while gross fixed capital formation had accelerated further its robust advance and the impact of net exports had become expansionary again.   Moreover, it was observed that, according to preliminary data, economic activity had receded mildly in quarterly terms in 2026 Q1 – i.e. by 0.2 percent after shedding 2.0 percent in 2025 Q4 –, while also falling by 1.7 percent versus the same year-earlier period, primarily on account of the weaker private consumption, as suggested by high-frequency indicators. A lower, yet positive, contribution could have come from net exports, as the annual change of exports of goods and services had seen its positive differential versus that of imports narrow visibly in January-February 2026, recording a relatively more pronounced drop against 2025 Q4. Consequently, the trade deficit had reported a slightly lower contraction in annual terms over that period, whereas the current account deficit had seen a faster year-on-year decline amid the improvement in the evolution of income balances, Board members noted.   Looking at the labour market, Board members pointed out that the number of employees economy-wide had shown a swifter decrease in January-March 2026 compared to the previous quarter, as well as against the same year-earlier period, whereas the ILO unemployment rate had also fallen in 2026 Q1 overall, yet after rising to an average of 6.2 percent in the previous three months, i.e. a five-year peak.   Furthermore, as indicated by the surveys, employment intentions over the very short horizon, as well as the labour shortage reported by companies had continued to decline in April 2026, reaching increasingly low levels from a historical perspective, yet at a visibly slower pace. Developments suggested further labour market easing, in the near run too, although amid its moderation, some Board members pointed out. At the same time, it was observed that the annual growth rate of nominal gross wage had posted a faster downward trend in 2026 Q1 as a whole, witnessing however increases in February and March on account of developments in the private sector, while the annual change of unit labour cost in industry had decreased markedly and almost continuously over the first three months of 2026 compared to the still high levels seen in the second half of 2025.   The future dynamics of labour costs were, nevertheless, marked by high uncertainties, Board members deemed, citing the developments in inflation and inflation expectations, as well as the hike in the minimum wage as of 1 July 2026, alongside the persistent mismatches between labour demand and supply in certain sectors, which could amplify again private sector wage pressures. It was agreed, however, that opposite effects would emerge from the increased uncertainties and costs generated domestically, as well as in Europe and worldwide, by the conflict in the Middle East, and from the fiscal consolidation measures, including the wage and employment policy measures in the public sector – likely to affect consumer demand and investment plans. Similar influences could further stem from global trade tensions – primarily through the effects on the euro area economy –, as well as from the structural changes in certain markets, but also from the rising resort by employers to non-EU workers and the expansion of automation and digitalisation, several Board members reiterated.   Turning to financial conditions, Board members pointed out the relative stability of the main interbank money market rates in the first part of 2026 Q2, but also the markedly fluctuating course of medium- and long-term yields on government securities.   The latter had initially steepened their downward path, before posting sizeable increases in the second half of April – in the context of the escalating Middle East conflict, but also amid the heightened political tensions domestically –, which had been however largely corrected during the first 10-day period of May. Against the same background, the EUR/RON exchange rate had re-embarked on an upward trajectory in mid-April, before witnessing a significant abrupt rise at end-April and in the first days of May, which had nevertheless been partly offset afterwards.   Risks to the leu’s exchange rate remained high, according to Board members. They referred to the fluctuations in global risk aversion amid the Middle East conflict, but also to the still wide twin deficits, as well as to the domestic political situation and the associated uncertainties. From that perspective, Board members repeatedly underlined the importance of political and government stability, as well as the need to continue the fiscal adjustment in line with the National Medium-Term Fiscal-Structural Plan agreed with the European Commission, conducive also to a gradual correction of the current account deficit, and with favourable implications for the sovereign risk premium, implicitly for the financing costs of the economy.     The assessment also showed that the annual pace of increase of credit to the private sector had picked up slightly in March 2026 as well, to 7.1 percent from 6.8 percent in February, as the annual rate of change of loans to non-financial corporations had stepped up its advance – driven by both the leu- and foreign currency-denominated components –, while the dynamics of household credit had halted the downward trend, following the re-acceleration of the growth rate of consumer credit and other loans.   As for future macroeconomic developments, Board members showed that the new assessments indicated a worsening of the inflation outlook in the first part of the projection horizon compared to previous forecasts. Specifically, the annual inflation rate would step up in 2026 Q2 above the previously envisaged levels and, after the abrupt downward correction anticipated for Q3 amid some base effects, it would resume its decrease on a higher path, re-entering the variation band of the target in 2027 Q3, one quarter later than in the prior forecast.   The indicator would then return, however, to the coordinates in the previous projection and continue to shrink gradually, remaining only slightly above the mid-point of the inflation target at the end of the forecast horizon. Thus, the annual inflation rate was expected to reach 10.3 percent in mid-2026 and come in at 5.5 percent in December 2026, versus 9.8 percent and 3.9 percent respectively anticipated previously for the same reference periods, before dropping to 2.7 percent in March 2028, compared with 2.9 percent indicated by the prior projection for December 2027, Board members underlined.   Behind the deterioration of the inflation outlook stood the effects anticipated to be exerted domestically – mainly via the surge in fuel prices – by the particularly sizeable increases in oil and natural gas prices amid the Middle East conflict, Board members remarked. It was noted that they would overlap the unfavourable base effects that would be manifest in the energy segment over the same period, but also the influences expected to stem from the liberalisation of the natural gas market for non-household consumers and from the mid-year removal of the cap on the mark-up on basic food products, whereas a small counterweight would probably come from the temporary measures aimed at shielding firms and households from the impact of the energy crisis.   Under the circumstances, the action of supply-side factors would strengthen its inflationary nature in 2026 Q2, including against the previous forecast, before turning strongly disinflationary again in Q3 – amid the dissipation of the direct effects exerted by the expiry of the electricity price capping scheme and by the increases in VAT rates and excise duties –, although to a smaller extent than anticipated earlier, Board members observed.   At the same time, it was agreed that the balance of risks stemming from supply-side factors remained tilted to the upside, at least in the short run, given especially the uncertainties associated with developments in oil and other commodity prices, as well as their potentially higher direct and indirect effects on the domestic front, inter alia in conjunction with the recent depreciation of the leu. However, Board members also pointed to the temporary measures aimed at cushioning the inflationary impact of the energy shock, as well as to the situation of consumer and aggregate demand, which could moderate the pass-through of pricier fuels to some goods and services prices.   Underlying factors were expected to exert very slightly disinflationary pressures in the near future, Board members showed. They mentioned the size of the aggregate demand deficit and the prospects for its further widening in the first half of 2026, but also the time lags necessary for the disinflationary effects of the negative output gap and of the flagging consumer demand to become manifest – especially amid the higher persistence of core inflation –, as well as the likely temporary re-acceleration of private sector wage cost dynamics in the first quarters of the current year.   Underlying disinflationary pressures would, however, strengthen over the longer horizon, Board members concluded. They observed that the aggregate demand deficit was anticipated to widen further in 2026 H1 and to narrow very slowly afterwards – amid the furthering of the budget correction, but also in the context of the global energy crisis –, going down and sticking throughout the forecast horizon to significantly lower-than-previously-envisaged values.   Moreover, the aggregate demand composition would probably improve further in 2026, through a continued increase in the contribution of investment to economic growth to the detriment of that of private consumption, with implications for the future dynamics of potential GDP as well, some Board members pointed out. It was unanimously deemed that, in such a context, the risk for the sharper rise in the annual inflation rate in 2026 Q2 to affect medium-term inflation expectations and generate second-round effects was significantly diminished, yet called for close scrutiny of all developments, also in light of the inflation behaviour in previous years.   The annual rate of core inflation would, nevertheless, still be marked until mid-2026 by the transitory effects of the hike in VAT rates, as well as by the high and rising levels of short-term inflation expectations, and it would additionally reflect the influences from the expiry of the cap on the mark-up on basic food products, alongside the indirect effects of pricier fuels and of the increase in natural gas prices for non-household consumers, Board members underlined. It was noted, moreover, that import price developments would temporarily become inflationary again amid the energy crisis and would be compounded in terms of impact on the domestic front by the higher level of the leu’s exchange rate.   Conversely, disinflationary contributions were expected, primarily in 2027, from the base effects associated with the price hikes induced in the current year by the energy shock, as well as from the downward adjustment of short-term inflation expectations starting 2026 H2.   Under the circumstances, the annual adjusted CORE2 inflation rate was anticipated to witness a more modest downward correction in 2026 Q3 compared with the prior forecast, and to go down until mid-2027 on a markedly higher-than-previously-envisaged path, but to fall below the mid-point of the target at the end of the projection horizon. Specifically, it was seen dropping to 4.8 percent in December 2026 and to 2.2 percent in March 2028, versus the 4.0 percent and 2.1 percent previously anticipated for end-2026 and end-2027 respectively, Board members pointed out.   Turning to the future cyclical position of the economy, Board members showed that economic activity would strongly reflect, in the first half of 2026 as well, the effects of the budget consolidation measures and of the high inflation dynamics, affecting primarily household real disposable income. However, it would then recover, particularly in 2027, mainly amid the use of European funds, especially those under the NRRP, as well as in the context of the de-escalation of the Middle East conflict and the revival of external demand. Against that background, the aggregate demand deficit would probably continue to widen in 2026 H1, before narrowing very slowly, on a significantly lower path than that anticipated in February, Board members underlined.   At that juncture, household consumption could decline mildly in the current year, but would make again the majority contribution to GDP dynamics in 2027, while gross fixed capital formation would probably accelerate its growth in 2026 and make a sizeable contribution to economic recovery in 2027, given the absorption and use of a markedly higher amount of EU funds, with crowding-in effects on the private sector as well, Board members remarked.   It was noted, moreover, that net exports would also exert an expansionary impact in 2026, but then would make again a more markedly contractionary contribution the following year, an outlook implying a more modest correction of the current account deficit-to-GDP ratio during 2026-2027 than previously foreseen. The indicator would thus stay considerably above European standards across the projection horizon, remaining a major vulnerability and, implicitly, a source of risks to inflation, the sovereign risk premium and, ultimately, to economic growth sustainability, Board members pointed out.   At the same time, heightened uncertainties were associated, in the current domestic political environment, with the measures that might be adopted in order to keep the budget deficit on a sustainable downward path beyond the current year, in line with the National Medium-Term Fiscal-Structural Plan agreed with the European Commission and with the excessive deficit procedure, Board members repeatedly showed.   Reference was also made, nevertheless, to the high uncertainties and risks to the outlook for economic activity, implicitly the medium-term inflation developments, arising from the energy crisis generated by the Middle East war, via the effects potentially exerted, through several channels, on consumer purchasing power and confidence, as well as on firms’ activity and profits, inter alia by affecting the dynamics of economies and inflation in Europe/worldwide and the risk perception towards the region, with an impact on financing costs.   It was underlined that, under the circumstances, the absorption and use to the maximum of EU funds, especially those under the NRRP, were essential for 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, but also for enhancing the growth potential and strengthening the resilience of the Romanian economy.   Board members were of the unanimous opinion that the analysed context overall warranted a policy rate status-quo, with a view to ensuring and maintaining price stability over the medium term, in a manner conducive to achieving sustainable economic growth.   In addition, Board members reiterated the importance of further closely monitoring domestic and global developments so as to enable the NBR to tailor its available instruments in order to achieve the fundamental objective regarding medium-term price stability, while safeguarding financial stability. Under the circumstances, the NBR Board unanimously decided to keep the monetary policy rate at 6.50 percent. Moreover, it decided to leave unchanged the lending (Lombard) facility rate at 7.50 percent and the deposit facility rate at 5.50 percent. Furthermore, the NBR Board unanimously decided to keep the existing levels of minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions.