Romania Faces Inflation Surge Amid Global Fuel Price Hikes

Romania's central bank maintained its benchmark interest rate at 6.50%, expecting rising fuel prices due to the Iran war to drive inflation into double digits. Despite tax hikes, inflation continues to challenge the economy, with further rate cuts uncertain as rising costs persist.

In response to soaring fuel prices fueled by the Iran conflict, Romania's central bank kept its benchmark interest rate steady at 6.50% on Tuesday. This decision was widely anticipated by analysts, as inflation threatens to reach double digits.

The inflation target, set between 1.5% and 3.5%, faces pressure as the Romanian government grapples with tax hikes from last year meant to address the EU's largest budget deficit. These factors, coupled with higher electricity costs, have propelled inflation to its highest point since mid-2023.

While rate cuts were originally projected for later this year, the ongoing fuel price surge has cast doubt over this timeline. The central bank foresees inflation peaking between March and June 2026 before stabilizing, anticipating an abrupt decline once current government tax impacts diminish.

(With inputs from agencies.)