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Romania Monetary Policy February 2023

Romania: NBR keeps the policy rate unchanged in February

At its 9 February meeting, the National Bank of Romania (NBR) left the policy rate unchanged at 7.00%. The decision followed eleven consecutive hikes. 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 Bank’s decision was driven by inflation plateauing during Q4 last year. Moreover, despite stronger-than-expected activity in Q3, the Bank highlighted Q4’s gradual slowdown in growth and employment, which likely contributed to its decision to hold fire.

While there was no explicit forward guidance, the Bank reiterated that it anticipates inflation will slow faster than previously estimated on the back of energy price caps and compensation schemes, as well as base effects and declining commodity prices. Most of our panelists expect the NBR to leave the policy rate unchanged at 7.00% throughout 2023.

On the outlook, Vlad Ionita, analyst at Erste Group, commented:

“We see key rate unchanged throughout 2023 at 7.00%. The other central banks in the region seem to have stopped hiking for a few months now, and the peak rates of ECB and FED are on the horizon; all the more reason for the NBR to decide that the current level of interest rates is optimal. ”

Meanwhile, Nicolaie Alexandru-Chidesciuc of JPMorgan was more hawkish:

“We continue to see the NBR on hold at 7% until August 2023, when we expect the key rate to be hiked by 25bp. […] Our view on more tightening is largely predicated on the expectation that while domestic inflation slows, it will show more persistence than in the NBR forecast and will imply inability to bring the forecast in the target band even in early 2025. We also think that global conditions will turn more challenging during 2H23.”

The next monetary policy meeting is scheduled for 4 April 2023.

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