The annual inflation rate will record a large jump in the third quarter (Q3) of 2025, under the transitory impact of the expiration of the electricity price cap scheme and the increase in VAT and excise duties, from August 1, and in the next three quarters it will decrease relatively slowly and on a fluctuating trajectory, considerably higher than that in the previous projection, the NBR shows.

The NBR Board of Directors also analyzed and approved, in its monetary policy meeting on Friday, the Inflation Report, August 2025 edition, a document that incorporates the most recent data and information available.

“According to the forecast in the Report, the annual inflation rate will record a large jump in the third quarter of 2025, under the transitory impact of the expiration of the electricity price cap scheme and the increase starting with August 1 in VAT and excise duties, and in the following three quarters it will decrease relatively slowly and on a fluctuating trajectory considerably higher than that in the previous projection. However, it will experience a steep downward correction in the third quarter of 2026, once the direct inflationary impact of the two shocks on the supply side has been exhausted, and will then gradually decrease, re-entering and falling increasingly within the target range towards the end of the projection horizon, against the backdrop of the intensification of disinflationary pressures in the aggregate demand deficit, expected to increase much more pronouncedly than in the previous projection, in the context of the packages of corrective fiscal and budgetary measures implemented starting with August 2025,” the press release states. NBR.

The central bank draws attention, however, to some uncertainties associated with the measures that will probably be adopted in the future in order to continue budgetary consolidation in accordance with the Medium-Term Budgetary-Structural Plan agreed with the EC and with the excessive deficit procedure.

Also, significant uncertainties and risks to the outlook for economic activity, implicitly the medium-term evolution of inflation, continue to come from the external environment, in the context of the war in Ukraine and the situation in the Middle East, but especially in the context of global trade tensions – likely to affect the course of the world economy and international trade -, as well as against the background of the effects potentially generated by the trade agreement agreed between the US and the EU, claims the cited source.

“In this context, the absorption and maximum use of European funds, mainly those related to the Next Generation EU program, are essential for partially offsetting the contractionary effects of budgetary consolidation and geopolitical/trade conflicts, as well as for carrying out the necessary structural reforms, including the energy transition. The monetary policy decisions of the ECB and the Fed, as well as the attitude of central banks in the region, are also relevant,” the press release states.

The NBR recalls that the annual inflation rate also registered an increase in June 2025, rising to 5.66%, from 5.45% in May, amid the continued increase in food and fuel prices, which outpaced the decrease in electricity and natural gas prices.

For the entire second quarter of 2025, the annual inflation rate thus increased more than expected, from the level of 4.86% reached in March, under the influence of the increase in food prices, especially fruit – including against the backdrop of unfavorable weather conditions at the regional level -, while the new dynamic increase recorded in this interval in energy prices was more than offset by the opposite evolution in the tobacco products segment.

In turn, the adjusted CORE2 annual inflation rate again interrupted its downward trend in the second quarter of 2025, increasing to 5.7% in June, from 5.2% in March. The rise resulted from the increase in the prices of some agri-food commodities and the gradual transfer of high wage costs to consumer prices, as well as from the increase in short-term inflation expectations and the leu/euro exchange rate, the action of which was slightly mitigated by disinflationary base effects and the downward trend in import price dynamics, the central bank explained.

The annual inflation rate calculated on the basis of the harmonized index of consumer prices (HICP – an inflation indicator for EU member states) increased in June 2025 to 5.8%, from 5.1% in March 2025. The average annual CPI inflation rate stood at 5.1% in June, a similar level to that in March 2025, and the average annual inflation rate calculated on the basis of the HICP decreased to 5.3% in June, from 5.4% in March 2025.

Article distributed with the support of  Schneider Electric