Romania's central bank sees slightly higher inflation and more risks posed by Govt. 's policy

Romania's National Bank (BNR) revised slightly upwards the projected inflation trajectory for the two-year forecast period envisaging now 7.5% inflation at the end of the year, up from 7.1% previously.

The headline inflation will drop to 3.8% at the end of June 2025, according to the latest quarterly Inflation Report publishedby BNR.

The differences stem chiefly from the faster dynamics of the adjusted CORE2 index and, to a lower extent, from those of the VFE (vegetables, fruit and eggs) index, with the latter component depending almost entirely on weather conditions, which have recently become highly unpredictable.

The monetary authority, however, notes that the fiscal and budgetary policies pose risks that result in a wider uncertainty interval.

Since the previous Inflation Report, risks to the baseline scenario appear to have risen in number and, at the same time, to have diversified.

The assessed balance of risks suggests possible upward deviations of inflation from its path in the baseline scenario.

While the developments attributed to the economic effects of the war in Ukraine, but also to the more general, geopolitical ones, were reconfirmed as a major source of uncertainty, the risks associated with the future fiscal stance amplified noticeably.

Hence, the authorities are highly likely to take corrective measures with a direct impact on the annual inflation rate.

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