The National Bank of Romania (BNR) kept its monetary policy rate unchanged at 6.5% on October 8 and signalled that inflation could rise further by the end of 2026, faster than anticipated, driven by higher energy and commodity prices, the prolonged Middle East conflict, severe drought and exchange-rate developments.

The central bank expects annual inflation to continue rising until the end of the year, with higher prices of fuels, energy and other commodities, including agricultural products, adding to price pressures. Its updated inflation forecast will be published after the next monetary policy meeting on November 12.

The BNR also pointed to “increasingly obvious underlying disinflationary pressures” over the longer term, mainly due to weak aggregate demand.

Erste Group expects the policy rate to remain at 6.5% at least until May 2027, citing persistent core inflation. The bank forecasts core inflation to return to the BNR’s target range only in the fourth quarter of 2027. Interest-rate increases appear unlikely given Romania’s deeply negative output gap, despite expectations of rate moves by other central banks.

Romania’s annual headline inflation eased to 6.17% in August, partly due to base effects following double-digit readings in the first half of 2026. The BNR’s August forecast projected inflation of 6.1% at the end of this year, declining to 3.8% a year later, while its September inflation projection stood at 5.9%.

Erste Group said it planned to raise its year-end inflation forecast from 6.4% to 6.9%, unless September data differ significantly from its current expectation of 6.6% (0.7 percentage points above BNR's August forecast).

On economic activity, the BNR expects quarter-on-quarter growth to turn positive in the third quarter of 2026, although annual GDP growth is expected to remain negative. Recent data point to a recovery from the previous quarter, partly supported by agricultural output, but weaker annual dynamics across demand components and major sectors.

The central bank warned that uncertainties surrounding fiscal consolidation and the Middle East conflict could affect both growth and inflation. Further budget measures under Romania’s medium-term fiscal plan agreed with the European Commission remain a source of uncertainty, alongside energy prices, consumer purchasing power, business profits and regional financing costs.