Romania's central bank is likely to keep its benchmark interest rate unchanged for several more quarters, potentially setting a European record for an extended period of monetary policy stability, according to National Bank of Romania (BNR) Deputy Governor Cosmin Marinescu.

'The change in monetary policy direction had already been signalled in 2024, before the current period of unchanged policy, which will probably continue for several more quarters, putting us on course to set a European record for 'unchanged monetary policy',' Marinescu wrote in an article published on his personal blog on Sunday.

The deputy governor said maintaining the benchmark interest rate at 6.5% since August 2024 should not be mistaken for a lack of response by the central bank. He explained that the decisions reflected assessments of economic demand and supply, inflation and risks to the inflation outlook.

Marinescu said the economic environment had been shaped by fiscal consolidation, trade tensions and geopolitical conflicts, with energy prices continuing to fuel inflationary pressures. At the same time, weak demand was exerting a disinflationary effect, although less strongly than anticipated.

He acknowledged that the prolonged wait-and-see approach could also reflect difficulties in adapting monetary policy to the fiscal changes that became necessary in 2025.

According to Marinescu, inflation exceeded 10% for several months in 2025, largely as a result of increases in VAT and other indirect taxes. However, the BNR ruled out raising interest rates because it regarded the resulting inflationary shock as temporary and primarily fiscal in origin.

'The credibility of monetary policy would have been called into question if the BNR had decided to raise interest rates in 2025, a year marked by a significant demand shortfall, after easing monetary policy in 2024, when analyses indicated a substantial excess of demand. By keeping the benchmark rate unchanged, we avoided reinforcing the procyclical nature of monetary policy, running counter to the economy and fiscal policy,' he said.

Marinescu added that unforeseen challenges in 2026, including external and domestic shocks, had reinforced decisions to keep rates unchanged and delayed the start of a monetary easing cycle, against a backdrop of stagflation risks and an increasingly recessionary economic outlook.

The deputy governor also examined Romania's inflation-targeting strategy, introduced in 2005, noting that inflation had remained within the target range in only six of the subsequent 21 years.

By comparison, inflation ended the year above the target range in five years in the Czech Republic, six in Poland and ten in Hungary, according to figures presented by Marinescu.

He argued that Romania had one of the most persistent inflation problems in the region and the European Union, although inflation targeting had helped reduce and stabilise price increases compared with the period before 2005.

Marinescu said the strategy should not be abandoned but strengthened by incorporating monetary analysis into central bank decision-making.

He also warned that monetary policy alone could not ensure macroeconomic stability amid Romania's substantial budget and external deficits and rising public debt.

'For Romania, in the coming years, it is imperative to calibrate a responsible mix of economic policies, respecting the principles of coherence and financial sustainability. The major challenge remains continuing the consolidation of public finances. Reducing the budget deficit and curbing public debt are essential to mitigating external vulnerabilities and expanding the room for manoeuvre in economic policy,' the BNR deputy governor concluded. AGERPRES (RO - writing by: George Banciulea; EN - writing by: Simona Iacob)