Interest rates remain at highest level in the EU in July

National Bank of Romania holds rates again: At its meeting on 8 July, the National Bank of Romania (NBR) maintained its restrictive policy stance, keeping the NBR reference rate at 6.50%—the highest in the EU. The hold was the 15th consecutive and had been penciled in by markets.

NBR balances weak economy with high inflation: The NBR stood pat, as inflationary pressures remained too strong to justify easing, while weak economic activity undercut the case for further tightening. The Bank opted against a hike, as slowing domestic demand, weaker consumption and fiscal consolidation are expected to generate disinflationary pressures in Q3, but refrained from cutting rates due to still-elevated headline and core inflation—headline inflation came in above 10% in April–May, far exceeding the Central Bank’s 2.5% target—exchange-rate risks, energy price uncertainty and fiscal policy concerns. Instead, the NBR adopted a wait-and-see approach, likely keeping policy restrictive until inflation shows a sustained decline.

NBR seen remaining cautious ahead: The NBR did not provide explicit forward guidance on future interest rate moves. Still, most panelists expect the Bank to keep rates unchanged through year-end, with only a minority seeing scope for a modest cut. The outlook remains highly dependent on the pace of disinflation, with energy price volatility, further leu depreciation and geopolitical instability posing upside risks. Still, a weaker-than-expected economy could strengthen the case for easing. The Bank will reconvene on 10 August.

Panelist insight: Erste Bank’s Vlad Ionita said: “We expect the key rate to remain at 6.50% until May 2027. Rate hikes appear unlikely in a weak economy operating with a negative output gap. Tighter liquidity management via deposit-taking tenders could lift the effective rate above the current 5.50% deposit facility level, but this is not our base case and would more likely reflect FX concerns rather than renewed inflationary pressures.”

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