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BUCHAREST, April 7 (Reuters) - Romania's central bank held its benchmark interest rate ROINTR=ECI at 6.50% as expected on Monday, faced with heightened risks over trade tariffs and fiscal uncertainty ahead of a repeat presidential election.

Stock markets plummeted across central Europe on Monday, adding to the biggest drop in several years after President Donald Trump announced steeper-than-expected U.S. tariffs last week, stoking fears of a global downturn.

"Heightened uncertainties and risks to the outlook for economic activity, implicitly medium-term inflation developments arise from the external environment ... especially amid the trade policy of the U.S. administration and the retaliatory measures taken by other countries," the central bank said in a statement.

The bank said it expected inflation to decline in March but not to the 4.6% level it had projected, before rising moderately throughout the second quarter. Annual inflation stood at 4.95% in February.

The central bank, which targets inflation at 1.5%-3.5%, sees the annual rate at 3.8% in December, sharply below the market forecast of 4.7%.

Romanian policymakers waited longer than their Czech and Hungarian counterparts with rate cuts last year, easing twice before high government spending and tax changes slowed inflation's decline and widened the budget deficit to the highest level in the European Union.

Romania will repeat in May a presidential election canceled in December over Russian meddling, which Moscow denies, with analysts and investors expecting further government measures to lower the deficit after the vote.

The Romanian leu EURRON= steady against the euro, virtually unchanged from levels before the rate announcement.

The decision to hold rates was widely expected, with policymakers seen resuming interest rate cuts in the second half of the year.

"The central bank's tight management of the exchange rate relies heavily on it being able to sustain capital inflows, so the risk-off sentiment across global markets will be a concern," Capital Economics said in a note. "EU retaliatory tariffs also pose upside risks to inflation."

(Reporting by Luiza Ilie
Editing by Tomasz Janowski)

((luiza.ilie@thomsonreuters.com; +4021 527 0312; https://www.reuters.com/journalists/luiza-ilie;))