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Romania Monetary Policy April 2022

Romania: NBR delivers fifth consecutive hike at April meeting

At its meeting on 5 April, the National Bank of Romania (NBR) raised the policy rate to 3.00% from 2.50%, marking the fifth successive hike. The move was also the second consecutive hike of 50 basis points, and was in line with market expectations. Concurrently, the Bank also raised other key rates: the lending facility (Lombard) rate to 4.00% (March: 3.50%) and the deposit facility rate to 2.00% (March: 1.50%). Meanwhile, the minimum reserve requirement remained unchanged. Elevated inflation, which has exceeded the Bank’s expectations this year, once again dominated the decision to hike rates; the headline inflation reading rose to 8.3% in January before reaching 8.5% in February, with core price pressures also rising over the same period. Higher commodity prices and supply-side shocks and bottlenecks were identified as the main sources of faster-than-expected inflation, as opposed to endogenous factors.

Looking ahead, the Bank did not seem particularly hawkish, though it reiterated its commitment to bring inflation back to within its 1.5–3.5% target so as to support sustainable growth. Nevertheless, the Bank stressed that several risks are present, particularly related to the ongoing fiscal consolidation targets, the absorption of EU recovery funds, developments in commodity prices and the Russia-Ukraine war. Considering inflation in March escalated to 10.2%, further policy tightening is well in order: Our panelists see several more rate hikes this year, with the majority expecting additional increases of between 25–150 basis points by the end of 2022.

The next monetary policy meeting is scheduled for 10 May 2022.

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