In its meeting of 16 May 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 went down to 4.86 percent in March 2025 from 5.02 percent in February, as a result of the drop in fuel and energy prices, the impact of which more than offset that of a faster hike in food prices.
In 2025 Q1 as a whole, the annual inflation rate declined less than anticipated, from 5.14 percent in December 2024, given that the decreases in the dynamics of fuel and tobacco product prices during this period, alongside those in the growth rates of non-food sub-components of core inflation, were partly counterbalanced, in terms of impact, by the swifter increase in energy prices, administered prices and processed food prices.
In turn, the annual adjusted CORE2 inflation rate resumed its decrease in 2025 Q1 at a slower-than-expected pace, dropping to 5.2 percent in March from 5.6 percent at end-2024.
The disinflationary base effects from non-food sub-components and the slowdown in import price dynamics had further a downward impact, while notable opposite influences came from the hike in some agri-food commodity prices, as well as from the gradual pass-through of higher wage costs to some consumer prices, also amid the high levels of short-term inflation expectations.
In April 2025, the annual inflation rate remained at 4.85 percent, given the divergent influences stemming, on the one hand, from the new declines in the dynamics of fuel and tobacco product prices, as well as of the non-food sub-components of core inflation and, on the other hand, from the further step-up in the growth rates of food prices and energy prices, inter alia on account of an unfavourable base effect.
The annual inflation rate calculated based on the Harmonised Index of Consumer Prices (HICP – inflation indicator for EU Member States) went down to 4.9 percent in April 2025 from 5.5 percent in December 2024. The average annual CPI inflation rate dropped to 5.0 percent in April 2025 from 5.6 percent in December 2024. In turn, the average annual HICP inflation rate decreased to 5.3 percent in April 2025 from 5.8 percent in December 2024.
Preliminary data point to a standstill in economic activity in 2025 Q1 compared with the slight advance anticipated in February, as well as to a decline in annual GDP dynamics to 0.2 percent from 0.5 percent in 2024 Q4, amid mixed developments across aggregate demand components and major sectors, as suggested by high-frequency indicators.
Thus, the annual growth of retail sales slowed down significantly in 2025 Q1 as a whole, and services to households witnessed a contraction January through February, while the annual dynamics of the volume of construction works posted a significant advance into positive territory in the first two months of the year from a large negative value in the previous quarter, mainly as a result of the strong rebounds in the residential and civil engineering works segments. However, industrial output witnessed a sharp contraction in 2025 Q1, after the slight recovery in the prior quarter, while the annual change in exports of goods and services saw a significant increase in its negative differential with that of imports, which rose much more visibly compared to 2024 Q4. Consequently, the annual growth rate of trade deficit posted a strong re-acceleration in 2025 Q1, while the high year-on-year increase in current account deficit continued to step up.
Looking at the labour market, the number of employees economy-wide picked up faster in January-February 2025 than in the prior quarter, while the ILO unemployment rate fell in the first three months of 2025 overall, after rising to and staying at an average of 5.7 percent in 2024 H2. The annual growth rate of nominal gross wage recorded a slower decline in 2025 Q1, remaining in the two-digit range, while that of nominal unit wage costs in industry increased to 16.6 percent during this period as a whole, after dropping considerably in 2024 Q4. April surveys point, however, to a decline in employment intentions over the very short horizon, as well as to a steep contraction in labour shortage reported by companies compared to the rises in the two indicators in 2025 Q1.
Financial market conditions remained relatively stable in April, before being strongly affected by the electoral context and the related tensions on the domestic political stage, conducive to high uncertainties and increased investor concerns about the outlook for budget consolidation and for the overall macroeconomic picture. Specifically, after having stayed practically flat in April, the main interbank money market rates saw considerable rises in the days immediately following the first round of the presidential elections, while yields on government securities climbed relatively abruptly, especially at the shorter end of the maturity spectrum. Moreover, the EUR/RON exchange rate recorded a significant increase and then tended to stick to the new readings, while the USD/RON went up even more steeply, given the stronger appreciation trend of the US currency in international financial markets.
The annual growth rate of credit to the private sector slowed to 9.2 percent in March, from 9.4 percent in February, reflecting the decline in the pace of increase of loans to non-financial corporations, which was only partly offset in terms of impact by the further step-up in the dynamics of household credit, solely attributable to leu-denominated housing loans. The share of the domestic currency component in credit to the private sector continued to widen slowly, to 70.0 percent in March from 69.9 percent in February.
The protracted electoral period and the rising political tensions reversed capital flows on the local financial market. Lately, capital outflows have increased significantly, in various forms. These shifts have had a major impact on liquidity and on money market rates, as well as on the demand-and-supply ratio in the forex market, Romania’s foreign exchange reserves and the leu’s exchange rate.
In today’s meeting, the NBR Board examined and approved the May 2025 Inflation Report, which incorporates data and information available until 30 April 2025.
According to the forecast in the Report, the annual inflation rate will fluctuate further until 2025 Q3, amid some base effects and the expiry of the electricity price capping scheme. It will then decrease for four quarters, on a significantly higher path than in the previous forecast, falling no sooner than in 2026 Q1 and only marginally below the upper bound of the variation band of the target, before remaining relatively constant.
The decrease will be driven by disinflationary base effects and by influences coming from the deceleration in import price growth, as well as from the downward adjustment of short-term inflation expectations, on a higher path, however, than in the prior projection. To these will add the lagged disinflationary effects from the negative output gap anticipated to open and to widen moderately during the current year, but to narrow slowly afterwards.
High uncertainties and risks stem from the future evolution of energy and food prices, largely correlated with developments in commodity prices, as well as from the trade policy measures taken in the advanced economies, with a potential significant impact on the international prices of some intermediate and final goods.
Heightened uncertainties are associated with the future fiscal and income policy stance, also in the current domestic political context, given on one hand the budget execution in the first three months of the year and, on the other hand, the budget consolidation requirement according to the National Medium-Term Fiscal-Structural Plan agreed with the European Commission and to the excessive deficit procedure. Having in place a credible budget consolidation package is crucial, inter alia in view of the need for an orderly correction of the external imbalance, as well as given the implications for the availability and cost of financing of both public and private sectors.
Furthermore, the absorption and use of EU funds, especially those under the Next Generation EU programme, are essential for counterbalancing, at least in part, the contractionary effects of budget consolidation and of geopolitical/trade conflicts, as well as for carrying out the necessary structural reforms, energy transition included.
High uncertainties and risks to the outlook for economic activity, implicitly the medium-term inflation developments, arise from the external environment, given the protracted war in Ukraine and 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.
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 particularly elevated uncertainty, the NBR Board decided in the meeting held today, 16 May 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 making the most of 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 new quarterly Inflation Report will be presented to the public in a press conference on 20 May 2025 at 11:00 a.m. 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 28 May 2025 at 3:00 p.m.
The next monetary policy meeting of the NBR Board will be held on 8 July 2025.