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Romania Monetary Policy October 2023

Romania: NBR keeps policy rate unchanged in October

At its 5 October 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 Q2’s weaker-than-expected annual growth and the deceleration of inflation in the first two months of Q3. Moreover, the NBR expects activity to have cooled further in the third quarter. That said, the Bank reiterated that it sees upside risks to the 2024 inflation outlook stemming from uncertainty surrounding upcoming fiscal and budgetary packages. As for the economic outlook, it added a subdued European economy to the list of risks, which also includes the evolution of commodity prices, 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 8 November.

On the outlook, Ciprian Dascalu, analyst for Romania at Erste, commented: “Assuming no meaningful deviation from the latest NBR inflation outlook, we see the key rate unchanged until the May 2024 meeting, given the tight labour market and strong real wage growth expected over the next couple of years.”

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