The National Bank of Romania (NBR) is reaching a breaking point. For months, Governor Mugur Isărescu has maintained a fortress of high interest rates while regional peers in Warsaw and Budapest began their easing cycles. The narrative changed this morning. ING Economics released a briefing suggesting that a rate cut in May now makes fundamental sense. This shift follows a February inflation report that caught many analysts off guard with its downward velocity.
The Disinflationary Trajectory
Inflation is no longer the runaway train it was in 2024. The latest data indicates that price pressures are finally receding into the NBR’s tolerance band. The technical term for this is the last mile of disinflation. It is often the most difficult part of the cycle. However, the February numbers show a cooling in service prices and food costs. This provides the central bank with the cover it needs to pivot without appearing soft on price stability.
Market participants are closely watching the NBR Interactive Database for shifts in liquidity management. The central bank has been absorbing excess liquidity from the interbank market for over a year. This has kept the Romanian Leu (RON) stable but at the cost of stifling domestic credit growth. If the NBR signals a cut in May, we should expect a gradual tapering of these sterilization operations. The goal is a soft landing, but the margin for error is razor thin.
The Fiscal Shadow and the Deficit Trap
Monetary policy does not exist in a vacuum. The Romanian government is currently grappling with a fiscal deficit that refuses to shrink. Estimates for the 2025 budget year suggest a deficit exceeding 6.5 percent of GDP. This puts the NBR in a precarious position. If they cut rates too early, they risk fueling a consumption boom that widens the trade deficit. If they wait too long, the high cost of debt servicing could push the economy into a recession.
Cynics argue that the NBR is essentially doing the heavy lifting for a profligate treasury. By keeping rates at 7.00 percent, the central bank is forcing a level of discipline that the political class lacks. Per the latest Eurostat HICP data, Romania still carries one of the highest price indices in the European Union. This disparity makes the May pivot a high-stakes gamble for the central bank’s credibility.
Visualizing the Real Interest Rate Gap
To understand why ING is calling for a cut, one must look at the real interest rate. This is the policy rate minus the inflation rate. As inflation drops and the policy rate remains static, the real interest rate rises. This creates an increasingly restrictive environment that can eventually break the back of the economy.
Romania Real Interest Rate Trajectory (September 2025 to February 2026)
Regional Peer Comparison
Romania remains the outlier in Central Eastern Europe. While the National Bank of Poland and the Hungarian MNB have been forced into more aggressive stances due to currency volatility, the NBR has prioritized stability. The table below illustrates the divergence in policy rates as of February 18, 2026.
Central Eastern Europe Monetary Policy Comparison
| Country | Central Bank | Policy Rate (%) | Inflation Rate (YoY %) |
|---|---|---|---|
| Romania | NBR | 7.00 | 4.1 |
| Poland | NBP | 5.75 | 3.8 |
| Hungary | MNB | 6.25 | 4.0 |
| Czechia | CNB | 3.75 | 2.2 |
The Technical Mechanics of the May Pivot
The NBR uses a symmetrical corridor of interest rates around the policy rate. Currently, the standing facilities are the Deposit Facility at 6.00 percent and the Lombard Facility at 8.00 percent. A cut in the policy rate to 6.75 percent in May would likely be accompanied by a narrowing of this corridor. This is a technical move designed to reduce volatility in the interbank market.
According to the latest ING Economics analysis, the market has already started pricing in this move. The 3-month ROBOR, which is the benchmark for many retail loans, has drifted down to 5.85 percent. This suggests that commercial banks are no longer waiting for the NBR to act. They are leading the central bank. If Isărescu fails to deliver in May, he risks a disconnect between official policy and market reality.
The risk of a currency sell-off remains the primary deterrent. The NBR is notoriously protective of the 5.00 level for the EUR/RON exchange rate. A rate cut narrows the interest rate differential, making the Leu less attractive to carry-trade investors. However, with the European Central Bank also signaling a dovish tilt, the NBR may find the room it needs to move without triggering a capital flight.
The focus now shifts to the April 14 inflation release. This data point will be the final confirmation the board needs before the May meeting. If the headline CPI prints below 4.0 percent, the 25-basis point cut is effectively a done deal. Watch the NBR’s language regarding ‘liquidity management’ in the coming weeks for the first signs of the thaw.
