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Romania Monetary Policy November 2023

Romania: NBR keeps policy rate unchanged in November

At its 8 November meeting, the National Bank of Romania (NBR) left the policy rate unchanged at 7.00%, as expected by markets. Additionally, the Bank left the deposit facility and the lending facility (Lombard) rates unchanged at 6.00% and 8.00%, respectively. The minimum reserve requirement was also left unchanged.

The NBR’s decision followed a slower deceleration of inflation in Q3 than in the previous two quarters. Moreover, the NBR expects activity to have cooled more than anticipated in the third quarter. That said, the Bank reiterated that it sees upside risks to the 2024 inflation outlook stemming from uncertainty surrounding “the future fiscal and income policy stance”, as well as, “the potential implications of the new legislation on pensions and wages in the public sector”. As for the economic outlook, it noted risks stemming from a subdued European economy, EU fund disbursements, and spillovers from the war in Ukraine.

The NBR provided no explicit forward guidance; it only stated that the Bank will monitor “developments in the domestic and international environment and will continue to use the tools at its disposal to achieve the fundamental objective of price stability in the medium term.” Our panelists expect the first rate cut in Q1 2024.

The next monetary policy meeting is scheduled for 12 January.

On the outlook, Stefan Posea and Valentin Tataru, economists at ING, commented:

“We maintain our view that the first rate cut will happen in April next year, although we acknowledge the risks for a prolonged higher-for-longer scenario. In our view, at this stage at least, we think that a higher tax burden during this visible growth slowdown could be more detrimental to private investment than for the disinflation process.”

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