The National Bank of Romania (BNR) decided on November 12 to maintain its key policy rate at 6.5% (chart), in line with market expectations. The central bank also cleared its updated Inflation Report (not published yet), forecasting a widening aggregate demand deficit that will reinforce the disinflation process once the current transitory inflationary episode ends in late 2026.

According to the BNR’s report, the annual inflation rate is expected to decline modestly over the next three quarters but remain on a fluctuating path above previous forecasts. This is due to stronger-than-expected direct effects from the expiration of the electricity price capping scheme on July 1 and from VAT and excise duty increases that took effect on August 1.

The report projects a sharp drop in inflation during the third quarter of 2026, when the temporary supply-side shocks fade. Thereafter, inflation is expected to continue declining at a slower pace, re-entering the central bank’s target range in the first quarter of 2027.

The anticipated widening of the aggregate demand deficit, partly a result of corrective fiscal measures introduced in August 2025, is expected to support this trend.

Financial analysts expect the BNR to begin easing monetary policy in the first half of 2026.

In a research note on the policy decision, Erste Group said it anticipates the policy rate to fall to 5.25% by the end of next year.

“The central bank is likely to wait and see the effects of the elimination of the remaining price caps on natural gas and basic food items before making a move,” the note stated.

Erste Group forecasts a total easing of 125 basis points, starting in May 2026, while noting that the timing of rate cuts will depend largely on inflation’s return to within the target band.

“If the degree of confidence regarding the return of inflation within the target band is reasonably high, we could see the first rate cut as early as February,” the note added.