Romania Holds Rate Amid Political Crisis, Govt Collapse

Romania's central bank has kept its benchmark interest rate at 6.5% for the sixth consecutive meeting, maintaining one of the EU's highest rates amid deepening political and economic uncertainty. The decision comes days ahead of a crucial presidential runoff, after a surge by a far-right candidate led to the collapse of the pro-Western government, market turmoil, capital outflows, and a record low for the Romanian leu. The central bank warned of extremely high uncertainty in inflation forecasts and emphasized the urgent need for credible fiscal consolidation to address Romania's large external deficit and stabilize financing. Inflation is projected to remain volatile and to drop below the 3.5% upper target only by early 2026, a slower decline than previously expected. The political crisis has heightened concerns about Romania’s investment-grade credit rating and its ability to deal with the EU’s largest budget deficit, which now exceeds 9% of GDP. Analysts say further rate hikes remain possible if currency pressures intensify.