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.
In July 2025 the annual inflation rate went up to 7.84 percent from 5.66 percent in June, while in August it rose to 9.85 percent, above the forecast, given the expiry of the electricity price capping scheme and the hike in VAT rates and excise duties as of 1 August, following the package of fiscal and budgetary measures adopted in July. The transitory direct effects of the two successive supply-side inflationary shocks affected primarily the aggregate dynamics of the exogenous CPI components, mainly via the particularly strong pick-up in electricity prices.
In turn, the annual adjusted CORE2 inflation rate posted a faster-than-anticipated increase, climbing to 7.9 percent in August from 5.7 percent in June. This reflects an extensive pass-through of VAT rate hikes to consumer prices, also amid the resilience of demand in certain segments and high short-term inflation expectations. Additional moderate influences came from higher prices of some agri-food commodities and the still fast dynamics of wage costs, as well as from indirect effects of the rises in electricity and fuel prices.
The annual inflation rate calculated based on the Harmonised Index of Consumer Prices (HICP – inflation indicator for EU Member States) rose to 8.5 percent in August 2025 from 5.8 percent in June 2025. The average annual CPI inflation rate went up to 5.7 percent in August from 5.1 percent in June, while the average annual HICP inflation rate reached 5.6 percent in August from 5.3 percent in June 2025.
Economic activity witnessed a significantly swifter advance in 2025 Q2, to 1.2 percent, after a slowdown to 0.1 percent in the previous three months (quarterly change), which makes it likely for the aggregate demand deficit to have widened more modestly over this period compared to expectations.
Moreover, annual GDP growth halted its decrease in 2025 Q2, remaining at 0.3 percent. However, domestic demand reported a steeper loss of momentum, given that the annual dynamics of gross fixed capital formation slipped slightly back into negative territory after the surge in the previous quarter, while those of household consumption declined further, albeit only marginally.
By contrast, net exports diminished considerably their contractionary impact in 2025 Q2, following the emerging divergence between the further step-up in the annual dynamics of exports of goods and services and the notable decrease in those of imports, in terms of volume. Against this background, the annual growth rates of trade deficit and current account deficit slowed down sharply, in the latter case also due to the improvement in the secondary income balance.
The latest data and analyses point to a near-stagnation of economic activity for 2025 H2 overall, associated, however, with an increase in annual GDP growth in Q3, amid mixed developments across the aggregate demand components and major sectors.
Thus, July through August, the annual growth rate of retail sales continued to slow down, while the annual dynamics of the volume of construction works witnessed a particularly large jump in July and industrial output saw a notable increase in annual terms. At the same time, the positive differential between the annual change in the exports of goods and services and that in the imports thereof widened, as the former posted a relatively more modest decline against the previous quarter. Under the circumstances, in July the trade deficit narrowed slightly versus the same year-ago period, while the current account deficit contracted markedly, also amid positive developments in income balances.
Looking at the labour market, the number of employees economy-wide continued to decline in June and July 2025, while the ILO unemployment rate dropped mildly in July-August overall, after rising and staying at an average of 6.0 percent in Q1 and Q2. Furthermore, the surveys indicate that employment intentions over the very short horizon recovered somewhat in September, after plunging in July-August, but solely on account of developments in trade, and the labour shortage reported by companies recorded an increase in Q3 as a whole, yet much smaller than the drop seen in the previous three months. The annual growth rate of nominal gross wage continued to decline in the first month of Q3, while that of unit labour costs in industry displayed a further significant decrease, although both remained relatively high.
The main interbank money market rates went down further August through September overall, yet relatively slowly, staying visibly above the April levels. At the same time, long-term yields on government securities witnessed a small upward adjustment in mid-Q3 and then tended to stick to the new readings. The EUR/RON exchange rate followed a relatively fluctuating course in August and September 2025, amid the successive revisions of investor expectations on the outlook for the Fed’s policy rate, but also reflecting the steps taken domestically in the setup and adoption of the second package of corrective fiscal measures. In relation to the US dollar, the leu weakened somewhat in August, but strengthened visibly afterwards, given the resumption of the former’s overall depreciation trend in the international financial market.
The annual growth rate of credit to the private sector remained on a downward path in the first two months of 2025 Q3, reaching 8.0 percent in August from 9.1 percent in June, as the new losses of momentum seen during this period by the growth in the leu-denominated component, mainly on the back of loans to non-financial corporations, were only partly counterbalanced by the steeper upward dynamics of foreign currency credit. The share of the domestic currency component in credit to the private sector thus continued to narrow, to 69.3 percent in August 2025 from 69.7 percent in June.
The current assessments indicate the prospects for the annual inflation rate to reach a plateau at end-Q3 and decrease very slowly over the following three months, amid the above-expectations transitory effects exerted by the expiry of the electricity price capping scheme on 1 July and the increases in VAT rates and excise duties starting 1 August.
However, the package of fiscal and budgetary measures adopted in July is, overall, likely to entail increasingly stronger underlying disinflationary pressures over the longer horizon, especially from aggregate demand, mainly via the fiscal adjustment thus initiated in 2025 and probably tighter next year, which will also lead to a sizeable correction of the current account deficit.
Uncertainties are, nevertheless, further associated with the 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 global trade tensions, as well as the war in Ukraine and the Middle East situation, on one hand, and the plans to increase defence and infrastructure investment spending in EU countries, on the other.
At this juncture, the full 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 October 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.
Competition Council reviews Bonafarm’s acquisition of FrieslandCampina Romania
