Romania's central bank may resume interest rate cuts in the second half of 2025, though policymakers are likely to proceed cautiously amid persistent inflation risks and fiscal uncertainty, ING Bank analysts said on Monday, February 17. 

The National Bank of Romania (BNR) left its benchmark rate unchanged at 6.50% at its latest meeting on February 14, citing external risks and a lack of fiscal clarity. However, ING economists believe conditions for easing could align later this year, forecasting two rate cuts totaling 50 basis points (bps) starting from mid-2025. 

"The bar for further rate cuts remains high, but we continue to expect monetary easing in the second half of the year," ING economists said in a note.

The BNR has signaled that premature rate cuts could exacerbate financial stability risks or fuel depreciation pressures on the Romanian leu. Governor Mugur Isărescu has ruled out aggressive easing, warning that it could be seen as an "invitation to currency devaluation."

ING expects Romania's consumer price index (CPI) to reach 4.8% by year-end, exceeding the BNR's upwardly revised 3.8% forecast. The bank attributes inflationary pressures primarily to rising food prices, while non-food and services inflation is expected to ease only gradually. 

"With inflation remaining relatively sticky and fiscal uncertainty still present, the NBR is unlikely to move before the second half of the year."

Analysts at ING also project a gradual depreciation of the Romanian leu (RON), forecasting the EUR/RON exchange rate to reach 5.05 by year-end. While the BNR is expected to maintain a controlled approach to currency adjustments, market expectations of easing could weigh on the leu. 

"If external uncertainties subside and inflation risks moderate, we see room for a small and controlled depreciation of the currency," ING's economists said.

andrei@romania-insider.com

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