In its meeting of 8 July 2025, the Board of the National Bank of Romania decided the following:
- to keep the monetary policy rate at 6.50 percent per annum;
- to leave unchanged the lending (Lombard) facility rate at 7.50 percent per annum and the deposit facility rate at 5.50 percent per annum;
- to maintain the existing levels of minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions.
The annual inflation rate stayed in April 2025 at 4.85 percent (4.86 percent in March), while in May it increased to 5.45 percent. The advance versus the end of 2025 Q1 owed to a further faster rise in food and energy prices, which outweighed considerably, in terms of impact, the new decreases in the dynamics of fuel and tobacco product prices, as well as of the non-food sub-component of core inflation.
In turn, the annual adjusted CORE2 inflation rate saw yet again a halt in its downward trend, going up to 5.4 percent in May, from 5.2 percent in March, given that the influences stemming from disinflationary base effects and the decline in import price dynamics were more than offset over this period by those coming from the hike in some agri-food commodity prices and the gradual pass-through of high wage costs to some consumer prices, as well as from the pick-up in short-term inflation expectations and the increase in the EUR/RON exchange rate.
The annual inflation rate calculated based on the Harmonised Index of Consumer Prices (HICP – inflation indicator for EU Member States) rose to 5.4 percent in May 2025 from 5.1 percent in March 2025. Nevertheless, the average annual CPI inflation rate fell to 5.0 percent in May from 5.1 percent in March 2025. In turn, the average annual HICP inflation rate dropped to 5.2 percent in May 2025 from 5.4 percent in March 2024.
Economic activity stalled in 2025 Q1, after adding 0.5 percent in the previous three months (quarterly change), which makes it likely for the negative output gap to open more visibly over this period compared to expectations.
Annual GDP growth contracted further in 2025 Q1 to 0.3 percent from 0.5 percent in 2024 Q4. Domestic demand continued, however, to see a swifter increase in annual terms, mainly on account of the dynamics of gross fixed capital formation, which surged, making a strong return into positive territory, whereas household consumption posted a notably slower rise, but remained the main driver of GDP advance.
By contrast, in 2025 Q1 net exports exerted again a significantly larger contractionary impact, given the further widening of the negative differential between the annual dynamics of exports of goods and services, in terms of volume, and those of imports, amid the latter advancing somewhat more visibly versus the previous quarter. Consequently, the annual growth rate of trade deficit posted a strong re-acceleration, while the current account deficit continued to record a fast year-on-year pace of increase.
The latest data and analyses point to moderate quarterly economic growth in 2025 Q2, in line with previous forecasts, amid mixed developments across the aggregate demand components and major sectors compared to the same year-ago period.
Thus, in April 2025, the annual growth rate of retail sales continued to slow down, while services to households recovered most of the decline seen in the previous quarter. The annual dynamics of the volume of construction works slipped very slightly back into negative territory, but industrial output posted a significantly stronger contraction versus the same year-ago period. At the same time, the annual change in exports of goods and services witnessed a heftier decline versus 2025 Q1 as compared to that in the imports thereof, and hence the annual increase in the trade deficit remained particularly fast in April, much the same as that in the current account deficit, which, however, moderated visibly.
Looking at the labour market, the incoming data show a decrease in the number of employees economy-wide in March and April 2025, as well as a drop in the ILO unemployment rate in April-May overall, after rising to 6 percent in Q1. Furthermore, the Q2 surveys indicate that employment intentions over the very short horizon stayed, on average, at the higher level seen over the past three months, whereas the labour shortage reported by companies shrank significantly. Nevertheless, the annual growth rate of nominal gross wage continued to decline relatively slowly in April 2025, remaining in the two-digit range, while that of unit labour costs in industry surged again at the beginning of Q2 to reach 21.8 percent.
Financial market conditions tended to normalise in the second half of Q2, amid the defusing of tensions in the domestic political landscape after the end of the electoral calendar and the headway in talks over the new ruling coalition and the setup of the package of corrective fiscal measures, conducive to the alleviation of financial investor concerns about budget consolidation prospects. Thus, the main interbank money market rates witnessed mild declines, staying however significantly above the April levels, while long-term yields on government securities corrected relatively quickly and fully the abrupt increases seen in the first 10-day period of May. Moreover, the EUR/RON exchange rate embarked on a downward path, which steepened slightly in the first part of June, before reverting to the values recorded towards the end of the previous month. In relation to the US dollar, the leu strengthened significantly, recovering entirely the ground lost in the first part of May, given the resumption of the former’s overall weakening trend in international financial markets.
The annual pace of increase of credit to the private sector stepped up further during the first two months of Q2 overall, reaching 9.7 percent in May, from 9.2 percent in March, given that the domestic currency component grew at a slightly faster tempo, solely on the back of loans to non-financial corporations, while the sizeable decline in the dynamics of forex credit in this period was more than offset by the statistical effect of the leu’s exchange rate developments. Hence, the share of the leu-denominated component in credit to the private sector narrowed to 69.8 percent in May 2025 from 70.0 percent in March.
According to current assessments, the annual inflation rate will pick up considerably in the following months, under the transitory impact of the expiry of the electricity price capping scheme and the increase in VAT rates and excise duties starting 1 August, thus climbing well above the values indicated by the May 2025 forecast over the short time horizon.
However, the package of fiscal and budgetary measures to be implemented starting August is, overall, likely to entail stronger underlying disinflationary pressures over the longer horizon, mainly via the effects exerted on aggregate demand, and to support a relatively swift and hefty correction of the current account deficit, with favourable implications for the economy’s financing costs and for the behaviour of the leu’s exchange rate, also in the period ahead.
Uncertainties are, nevertheless, further associated with the additional corrective measures likely to be adopted in the future in order to continue budget consolidation in line with the National Medium-Term Fiscal-Structural Plan agreed with the European Commission and with the excessive deficit procedure.
High uncertainties and risks to the outlook for economic activity, implicitly the medium-term inflation developments, continue to arise from the external environment, given the war in Ukraine and the Middle East situation, but especially amid the uncertainty and the potential effects generated by the US trade policy and by the retaliatory measures taken by other countries, affecting the developments in the global economy and in international trade.
At this juncture, the absorption and use of EU funds, especially those under the Next Generation EU programme, are essential for partly counterbalancing the contractionary effects of budget consolidation and of geopolitical/trade conflicts, as well as for carrying out the necessary structural reforms, energy transition included.
The ECB’s and the Fed’s monetary policy decisions, as well as the stance of central banks in the region, are also relevant.
Based on the currently available data and assessments, as well as in light of the elevated uncertainty, the NBR Board decided in the meeting held today, 8 July 2025, to keep the monetary policy rate at 6.50 percent per annum. Moreover, it decided to leave unchanged the lending (Lombard) facility rate at 7.50 percent per annum and the deposit facility rate at 5.50 percent per annum. Furthermore, the NBR Board decided to maintain the existing levels of minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions.
The NBR Board decisions aim to ensure and maintain price stability over the medium term, in a manner conducive to achieving sustainable economic growth. The NBR Board reiterates that, at the current juncture, the balanced macroeconomic policy mix and the implementation of structural reforms, also by using EU funds to foster the growth potential over the long term, are of the essence in preserving a stable macroeconomic framework and strengthening the capacity of the Romanian economy to withstand adverse developments.
The NBR closely monitors developments in the domestic and international environment and stands ready to use the tools at its disposal in order to achieve the fundamental objective regarding medium-term price stability, while safeguarding financial stability.
The account (minutes) of discussions underlying the adoption of the monetary policy decision during today’s meeting will be posted on the NBR’s website on 18 July 2025 at 3:00 p.m.
The next monetary policy meeting of the NBR Board will be held on 8 August 2025.