Inflation in Romania Slows to 9.6% but Remains Above Forecast

Tax Measures Keep Prices Elevated as Central Bank Holds Rate at 6.5%

Inflation in Romania slowed in January 2026, yet the pace of easing fell short of analysts’ expectations, adding uncertainty around the timing of potential rate cuts. Price growth remains close to 10% following last year’s surge driven by tax increases and spending cuts. The National Bank of Romania is keeping its key interest rate at 6.5% and is not planning to lower it in the near term, Bloomberg reports.

Inflation in Romania: Emerging Trends

According to the statistics office in Bucharest, consumer prices rose 9.6% year-on-year in January, compared with 9.7% a month earlier. The Bloomberg consensus forecast had expected a slowdown to 9.4%. On a monthly basis, prices increased by 0.9%.

While inflation is formally declining, the pace of moderation remains insufficient. For an economy already facing recession, this implies that tight financial conditions could persist longer than previously anticipated.

The sharp rise in prices in 2025 followed the government’s decision to raise certain taxes and cut spending after the country emerged from one of the most serious political crises in decades. The removal of caps on electricity tariffs added further pressure to the consumer basket.

Inflation in the Eurozone

According to a preliminary estimate by Eurostat, annual inflation in the eurozone stood at 1.7% in January 2026. Across the European Union as a whole, inflation remained around 2%. This means Romania’s inflation rate is nearly four times higher than the eurozone average. The country’s price dynamics therefore appear to be a distinct inflation episode driven primarily by domestic factors rather than part of a broader European trend.

Eurostat also notes that services are currently the main source of price pressure in the eurozone, while the energy component has weakened on a yearly basis. In contrast, Romania’s removal of energy price caps last year, combined with tax changes, intensified the inflationary impulse and explains the more prolonged path of disinflation.

Tax Hikes and Budget Deficit

The Romanian government is seeking to reduce the largest budget deficit in the European Union. In 2025, the deficit reached 7.7% of GDP. Authorities aim to lower it to 6.2% of GDP in 2026.

The four-party political coalition has faced internal disagreements, delaying further spending cuts. Prime Minister Ilie Bolojan intends to introduce additional fiscal consolidation measures in the coming weeks.

Deficit reduction remains a key condition for macroeconomic stabilization. At the same time, fiscal consolidation restrains domestic demand and limits the scope for a rapid economic recovery.

Key Rate and Central Bank Policy

The National Bank of Romania has held its benchmark rate at 6.5% since mid-2024. The regulator is taking a wait-and-see approach, seeking more convincing evidence of inflation slowing before shifting toward monetary easing.

The inflation target range is set at 1.5%–3.5%. According to the central bank’s projections, price growth may slow to 3.7% by the end of 2026. This remains above the upper bound of the target corridor, underscoring the regulator’s cautious stance.

Governor Mugur Isărescu indicated in November that discussions about a rate cut were unlikely to begin before summer. The latest inflation data reinforce that position.

Economic Outlook for Romania

The International Monetary Fund expects Romania’s real GDP to grow by around 1.4% in 2026. The IMF stresses the need for consistent fiscal consolidation to restore macroeconomic stability and reduce the budget deficit.

The European Commission forecasts economic growth of about 1.1%. The deficit is projected to narrow to roughly 6.2% of GDP, although public debt is expected to continue rising amid subdued growth.

Moody’s and Fitch maintain negative outlooks, citing risks related to the budget deficit and political uncertainty surrounding the pace of consolidation. Analysts emphasize the need for further structural reforms. These negative assessments limit the room for rapid monetary easing.

Conclusion

Analysts at International Investment note that Romania’s economy has entered a recession. Deficit reduction remains a priority, as investor confidence and borrowing costs depend on it. The central bank’s room for maneuver is limited, with inflation still well above the target range.

In the coming months, price dynamics will determine policy decisions. If disinflation proves insufficient, the rate is likely to remain unchanged even amid weak economic activity. A more sustained slowdown could allow for cautious easing in the second half of the year.

The impact of tax changes and the removal of tariff caps will continue to be felt for some time, even as inflation moderates. The situation reflects not only monetary factors but also broader fiscal and structural imbalances shaping the sustainability of the recovery.