Romanian Inflation Extends Slowdown as Rate Watchers See Cuts Coming

Andra Timu and Irina Vilcu
·1-min read

(Bloomberg) -- Romanian inflation slowed more than expected in May, boosting the chances for the first rate cut in more than three years.

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Consumer prices rose 5.1% from a year earlier compared with 5.9% in April, the statistics office said on Wednesday. That’s below the 5.6% median estimate of economists in a Bloomberg survey. Prices fell 0.1% from the previous month.

Policymakers in Bucharest unexpectedly kept the key interest rate unchanged at 7% in May because of concerns that ballooning budget deficit and growing wage demands may fuel price growth in the coming months. Romania has the highest inflation in the European Union.

Economists at Raiffeisen Bank Romania predict the rate cut will likely come at the next policy meeting on July 5, with more cuts to follow in August and November.

While the National Bank of Romania has shown “elevated prudence” toward monetary easing, the key rate is likely to decline to 6.25% by the end of the year despite “sticky” inflationary pressures, Andreea Elena Draghia, a Raiffeisen analyst, said in a note.

The central bank forecasts inflation will slow to 4.9% by the end of this year and to below 3.5% — the top end of the central bank’s target range — only in early 2026.

--With assistance from Barbara Sladkowska.

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