National Bank of Romania leaves rates unchanged in May

Hold in line with expectations: At its meeting on 16 May, the National Bank of Romania (NBR) decided to keep the monetary policy rate at 6.50% for the sixth straight meeting, matching market expectations. The rate remains well above its 10-year pre-pandemic average of around 3.50%.

Higher uncertainty drives the decision: The hold came amid heightened domestic uncertainty after a far-right, Eurosceptic candidate won the first round of presidential elections on 4 May—triggering the prime minister’s resignation, capital outflows, market volatility and local currency depreciation. Moreover, the NBR likely turned more hawkish in May as it raised its inflation outlook for the coming years, giving the Bank further reason to hold fire. The Bank will reconvene on 8 July.

NBR to cut but uncertainty looms: The NBR did not provide forward guidance on the future direction of interest rates. Our panelists expect the Central Bank to deliver rate cuts of up to 200 basis points by the end of 2025, on the back of weak economic growth and the ECB’s easing cycle. That said, fiscal concerns, heightened FX vulnerability from elevated risk premia, sovereign rating risks and a largely upward inflation forecast could limit the NBR’s room to cut.

Panelist insight: Commenting on the outlook, ING’s Valentin Tataru and Stefan Posea stated: “Our base case still points to some moderate policy easing later this year, but not before October, with a real risk of the cycle being pushed into 2026. One thing is clear—several key conditions must align before rate cuts can be considered: a stable government, credible fiscal reform, continued access to EU funds, preserving the investment-grade rating, money market rates falling back below the policy rate and, of course, inflation staying under control. We’re not saying it’s impossible, but it looks as though the path to easing is still narrow and vulnerable to setbacks.”

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