Oxford Economics: NBR to Keep Rates at 6.5% Through 2026

The National Bank of Romania (NBR) is expected to keep its policy rate at 6.5% for the remainder of 2026, with Oxford  Economics forecasting the first interest rate cut in the first quarter of 2027.   The NBR kept its policy rate unchanged at 6.5% at its August meeting, in line with both Oxford Economics’ and market expectations. According to the research firm, the central bank’s rate-cutting cycle, initially expected to begin in the second quarter of 2026, was delayed by the spike in inflation linked to the conflict in the Middle East.   Oxford Economics believes inflation in Romania has likely passed its peak, creating conditions for a continued period of unchanged interest rates in the coming months. However, the NBR faces a difficult balancing act as it assesses the impact of higher energy  prices alongside weaker  economic growth and fiscal consolidation.   Headline inflation fell for the first time in four months, reaching 10.4% year-on-year in June. Oxford Economics expects inflation to decline further, noting that food and non-food goods inflation already decreased in June, although core inflation continued to rise. The research firm expects headline inflation to fall significantly in July as the direct effects of last year’s energy price cap withdrawal and the VAT increase begin to fade from annual comparisons.   Weaker consumer spending, driven by high inflation and fiscal consolidation, is also expected to contribute to lower core inflation. Meanwhile, wage growth remains subdued amid relatively loose labor market conditions, reducing the risk of significant second-round inflationary effects.   Oxford Economics forecasts Romanian inflation to fall to 5.2% by the end of 2026 and to 2.5% in 2027.   Despite the expected decline in inflation, Oxford Economics warns that significant risks remain, particularly because of continuing disruptions to energy prices and Romania’s high sensitivity to energy costs.   The NBR therefore faces a challenging macroeconomic environment in which it must weigh competing forces. Higher energy prices could keep inflation elevated, while weaker economic activity and fiscal consolidation should exert downward pressure on prices.   “Inflation has likely passed its peak, but the NBR faces a challenging macroeconomic environment in the coming months,” Oxford Economics said in its assessment. Based on its current outlook, Oxford Economics expects the NBR to maintain the policy rate at 6.5% throughout the rest of 2026, keeping monetary policy restrictive.   The research firm forecasts that the central bank will begin cutting rates in Q1 2027, followed by a 25-basis-point reduction every quarter during the year.   Under this scenario, Romania would enter 2027 with inflation on a clear downward trajectory, allowing the NBR to gradually ease monetary conditions while continuing to monitor energy prices, wage developments and the impact of fiscal consolidation on economic activity.