The Evolution of Inflation and the Monetary Policy Response in Romania: A Decade of External Shocks and Structural Constraints

This study examines the dynamics of inflation in Romania during 2014-2024, a decade marked by overlapping crises that shaped the macroeconomic landscape. The COVID-19 pandemic, the global energy shock, the Russia-Ukraine conflict, and renewed geopolitical tensions significantly altered price trajectories and disrupted expectations. These external pressures interacted with domestic structural rigidities, procyclical fiscal policies, and political uncertainty, creating a complex environment for monetary policy transmission. Using an integrated narrative approach complemented by a regression-based assessment of exchange rate determinants, the paper analyzes the capacity of the National Bank of Romania (NBR) to mitigate inflationary pressures through interest rate adjustments, liquidity management, and communication strategies. Results indicate that while monetary policy contributed to financial stability and partially contained second-round effects, its effectiveness was constrained by weak expectation anchoring, low financial intermediation, and limited fiscal-monetary coordination. A comparative perspective with Poland, the Czech Republic, and Hungary highlights the relevance of institutional credibility and the role of structural features in determining policy outcomes. The paper concludes with policy recommendations aimed at strengthening resilience and improving the transmission of monetary policy in small open emerging economies.