The annual inflation rate, measured based on the consumer price indices, will continue to follow a generally decreasing trend throughout the current year, followed by a stabilisation in the upper half of the target range starting 2026, National Bank of Romania (BNR) Governor Mugur Isarescu said on Monday.

'Most certainly, what is happening now, the tension between the United States and the European Union, could not be included in this forecast. Based on it, but also on internal data, we have this inflation development. The annual inflation rate, measured based on the consumer price indices, will continue to follow a generally decreasing trend throughout this year, followed by stabilisation in the upper half of the target range starting 2026. Compared to the previous forecast, we are slightly higher now, but notice the red curve. Towards the end of the forecast period, the present data show a better inflation situation,' said Isarescu.

According to him, in the first half of the year, there will be no major inflationary pressures, but rather influences generated by past shocks.

'Regarding these fluctuations in pace in the first half of this year, they are mainly generated by base effects, there are no major inflationary pressures. These are base effects caused by past shocks. Indirect taxes were raised in January 2024, and consequently, we have a decrease in January 2025, then reductions in natural gas and unprocessed food prices in Q2 2024, and after these base effects pass, inflation will remain somewhere below 5%, according to our forecast. It will go down starting from the summer of this year,' explained the governor of the National Bank of Romania.

Mugur Isarescu underscored that Romania was not the inflation champion last year, as was claimed, and even had the lowest figures compared to three similar countries - the Czech Republic, Poland, and Hungary - but the decrease in inflation was slower in Romania.

'I made for you, because I saw repeatedly that we were inflation champions, a comparison with the three countries we can compare with, which are not in the Eurozone, targeting inflation like us, having the same monetary policy regime, and a more or less controlled exchange rate floating system: the Czech Republic, Poland, Hungary and Romania. Note that, starting with this episode, this period of inflation that began with the pandemic, then the war in Ukraine, and then the energy crisis, our behavior has not deviated, let's say, from how inflation and monetary policy behaved in the other three countries we compared with. I would say that until last year, not only were we not inflation champions - we had the lowest inflation. The highest was in Hungary, almost 25% at its peak, then in Poland, and we were just slightly below the Czech Republic. The decrease in inflation was much slower in our case. And this happened in 2024, an electoral year, with several problems that you know about,' he argued.

In January 2025, Poland and Hungary had a higher inflation rate than Romania, Isarescu points out.

'Finally, in January, we are no longer the inflation champions in the EU. The Poles and Hungarians have surpassed us. In Romania, inflation is 4.95% - 5%, depending on where we round it - in Hungary, it's 5.3%. The fact that we have an interest rate policy, meaning a higher interest rate, is related to something else. It's related to internal political tensions and to the fact that now, fairly, we consider that financial stability, and related to this stability of the exchange rate, is important, I would say even very important. This is where our caution comes from, which is not excessive. A reduction in the monetary policy rate may appear... in the eyes of the markets, considering the dimensions of the deficits, as an invitation to depreciate the exchange rate, which is not the case now. In the next two years, the main disinflationary contribution is attributed to the adjusted CORE-2 rate evolution. What does that mean? That the monetary policy is working,' concluded Isarescu. AGERPRES (RO - writing by: Oana Tilica; EN - writing by: Adina Panaitescu)