The National Bank of Romania kept its benchmark interest rate at 6.5% on Monday, August 10, matching what every economist in a Bloomberg survey predicted.
That makes Romania's key rate the highest in the European Union. And it is not going anywhere soon.
The rate has now sat at 6.5% for almost two years. The central bank is playing a waiting game, and it is waiting on two things: inflation and politics.
In May and June, consumer price growth returned to double digits, exceeding 10% again, driven largely by oil costs linked to the Middle East crisis. Your electricity bill and your grocery bill have felt that. The bank also pointed to food prices, this year's severe drought, and world oil prices as ongoing risks.
Here is the situation: Prime Minister Ilie Bolojan lost a no-confidence vote in May but is still in office with limited powers.
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That matters because Romania is trying to climb out of a recession that was partly caused by earlier austerity measures. Cutting spending reduced consumption and investment, and now the country needs that EU money to get moving again.
The central bank said the political situation creates major uncertainty about possible fiscal consolidation after this year. In plain terms, nobody knows what the next government will do about the budget deficit, and that makes planning nearly impossible.
On Monday, the central bank signed off on refreshed inflation projections, with Governor Mugur Isarescu scheduled to reveal the specifics on Thursday. The broad picture is already clear.
Annual inflation is expected to drop sharply in the third quarter. That is because the effects of expired electricity price caps and some tax increases are finally fading. But the path after that is not smooth.
Inflation will move unevenly during the final quarter of 2026, then gradually decline and hit the 1.5%-3.5% target range by the end of next year. That is the bank's own projection, and it is not a fast ride.
The catch: July inflation data lands on Wednesday, and it will give the first real clue about whether that sharp third-quarter drop is actually happening.
The bond market is paying attention. Romania's dollar-denominated bonds performed strongly in emerging markets on Monday, and local debt rose after Moody's affirmed the country's lowest investment-grade rating late Friday. Fitch made a similar call a week earlier.
But both agencies put negative outlooks on Romania. They have warned that a lack of a fully functioning government, or a halt in budget-deficit reduction, could hurt the rating later. A downgrade would make it more expensive for Romania to borrow, and that cost eventually trickles down.
For investors, the takeaway is straightforward. The central bank is in no hurry to change that, and the politicians are not helping.
If you hold Romanian assets, the next few months come down to watching two things: whether inflation actually cools and whether a government actually forms. One of those is more predictable than the other.
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