Romania’s annual inflation rate (chart) accelerated to 5.66% in June, up from 5.44% in May, exceeding Bloomberg's analyst consensus of 5.5%, according to data released by the National Institute of Statistics on July 11. The increase comes ahead of anticipated upward price pressures from electricity market liberalisation and a forthcoming value-added tax (VAT) hike in August.

Core inflation, measured by the National Bank of Romania's (BNR) adjusted CORE2 index—which excludes administered prices, volatile food items, tobacco and alcohol—also rose to 5.65% in June from 5.44% in May, Erste Research reported.

Food prices saw a 7.4% year-on-year increase, outpacing other categories. The Romanian government extended its food price cap scheme, initially implemented in 2023, for an additional three months until the end of September, in an effort to limit household cost increases.

Non-food prices rose by 3.9% year-on-year in June and have remained relatively stable since February, largely due to falling energy prices during that period. However, the July liberalisation of electricity prices is expected to reverse this trend, potentially adding to inflationary pressures in the coming months.

Services inflation climbed by 7.1% year-on-year, driven by double-digit increases in utility and medical service costs, according to the same data set.

Erste Group has revised its year-end inflation forecast to 7.5% from a previous estimate of 5.6%, citing significant upside risks. These include a projected 30% rise in electricity prices in July, which market trends indicate may be even higher, and an estimated 60% pass-through of the August VAT hike into consumer prices.

In light of these developments, Erste expects the BNR to hold its key interest rate steady for the remainder of 2025. The first policy rate cut is now anticipated in February 2026, contingent on stable inflation expectations and the absence of new supply-side shocks. The central bank is also expected to publish its updated inflation outlook in August, after confirming a forthcoming upward revision to its forecast.