Romania’s central bank raises inflation forecast amid end of energy price cap
The National Bank of Romania (BNR) has revised upward its inflation forecast for nearly the entire projection horizon, citing the planned lifting of the energy price capping mechanism at the end of June 2025 and higher core inflation contributions. The updated projections were published in the May 2025 edition of the Quarterly Inflation Report.
According to the new forecast, annual inflation is expected to reach 5.1% at the end of the second quarter of 2025 before falling to 4.6% by the end of the year. It is then projected to decrease further to 3.4% at the end of 2026 and 3.3% by March 2027.
Compared to the previous report, the BNR raised its end-2025 inflation forecast by 0.8 percentage points and its end-2026 forecast by 0.3 percentage points. The only downward revision was for the second quarter of 2025 due to a temporary statistical base effect.
The main driver of the upward revision is a reassessment of core inflation, which is now expected to contribute more significantly over the entire forecast period.
In addition, the expiration of the current electricity price capping mechanism is assumed to lead to a 15% increase in energy prices from 1 July 2025, exerting further inflationary pressure in the second half of 2025 and into the first half of 2026.
“These adjustments are driven by higher anticipated contributions from core inflation and by the impact of the hike in electricity prices,” the BNR stated while noting that some of these pressures will be partially offset by more favourable trends in other components of the consumer price index, including fuels, tobacco, alcohol, and volatile food prices.
The inflation outlook comes at a time of heightened fiscal and political uncertainty in Romania, with the central bank and international institutions warning of risks to macroeconomic stability if structural reforms are not implemented. The BNR has maintained its key interest rate at 6.5%, citing persistent inflation risks and capital market volatility.
iulian@romania-insider.com
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