National Bank of Romania holds fire

Hold matches market expectations: On 17 February, the National Bank of Romania (NBR) stood pat, leaving the NBR reference rate unchanged at 6.50%—among the highest in the EU. The hold had been penciled in by markets and marked the 12th consecutive pause.

Sticky inflation drives decision: The NBR opted to leave rates unchanged in February in a bid to combat elevated inflation in the recession-hit economy. Inflation came in at 9.6% in January, remaining the highest in the EU and well-above the Central Bank’s 1.5–3.5% target. Price pressures picked up in the second half of last year, bolstered by the expiration of an electricity price-cap scheme and tax hikes aimed at reducing the government’s budget deficit. The Bank subsequently prioritized a wait-and-see approach as cutting rates would likely fan inflation further. On the flip side, the Bank had no room to hike rates, as recently published flash GDP data revealed that the economy entered recession in Q4.

Rate cuts seen resuming as early as Q2: Our panelists expect the NBR to resume monetary policy easing as early as Q2 in a bid to boost domestic economic activity. Almost all of our panelists have penciled in easing for this year; our Consensus is for rates to end 2026 roughly 100 basis points below their current level. Moreover, inflation is expected to trend down thanks to the fading effect of the expired electricity price cap, as well as higher rates for VAT and excise duty introduced in mid-2025. The Bank will reconvene on 4 April.

Panelist insight: ING analysts Valentin Tataru and Stefan Posea commented on the outlook: “With much of the near-term inflation volatility driven by identifiable, largely mechanical factors, there is a growing risk that maintaining a strictly cautious stance for too long could become pro-cyclical, amplifying the downturn without materially improving the medium-term inflation outlook. A carefully framed, incremental cut in May would be consistent with NBR’s own emphasis on underlying momentum and risk management, allowing policy to remain restrictive overall while reducing the probability that monetary conditions lag the rapidly weakening cycle.”

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