With VAT and excise duties now fully in effect, markets expected today’s inflation data to edge into double digits at 10.1%. Our estimate was 10.0%. In fact, fresh fruits and vegetables (especially potatoes) exerted slightly more downward pressure on prices than expected.
In the non-food sector, prices were generally well-behaved, with price movements falling mostly within their normal ranges. Gas prices helped a bit towards lower overall pressures, falling by 2.0% on the month.
Services inflation moderated compared to last month’s strong reading, but still continued to pick up at a slightly above-average pace. Hospitality, reparation and entertainment services continue to see the strongest pick-ups in prices.
Outlook: no change in forecasts
In the near term, while a marginally above 10% print in October cannot yet be excluded, in our base case we expect inflation to continue to marginally undershoot the double-digit territory and moderate slightly towards 9.6% in December 2025. We continue to expect an elevated profile until the summer of 2026, when the impact of the recent measures will fall out of base and help price pressures cool down towards 4.5% by the end of 2026.
Fundamentally, the slowdown in consumption and wage growth remains the key disinflationary force. Retail sales have shown a sharp monthly decline in August, and wage growth has moderated to 4.4% year-on-year – a very low level from a historic perspective, often associated with economic strain.
Risks to economic growth remain tilted to the downside, at least until the investment cycle delivers through its tight NRPP deadlines. This should stoke disinflationary pressures ahead, although the transmission into headline inflation may take time.
Our team is expecting global oil prices to continue moderating, and while agricultural output may support food price stability, its influence is likely to remain secondary.
Policy implications
We maintain our view that the National Bank of Romania will look through this inflationary cycle. In the absence of new shocks to inflation, the focus is expected to shift increasingly towards downside risks to growth, which may eventually influence monetary policy decisions. We maintain our estimate for the first rate cut in May 2026 and a total of 100 basis points of rate cuts next year.
