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Romania Monetary Policy May 2024

Romania: National Bank of Romania holds rates in May

At its meeting on 13 May, the National Bank of Romania decided to keep the monetary policy rate at 7.00% per annum, the lending (Lombard) facility rate at 8.00% and the deposit facility rate at 6.00%.

The key domestic factors influencing the Central Bank’s decision included a decrease in inflation to 6.6% in March 2024 (February: 7.2%), primarily due to a slowdown in food price growth, alongside a deceleration in core inflation. Additionally, the decision was influenced by a disinflationary base effect, a correction in agricultural commodity prices and a cap on the mark-up of basic food products, despite the mitigating effects of fiscal measures implemented at the beginning of the year, higher short-term inflation expectations and wage increases.

The Central Bank provided no explicit forward guidance on the future direction of interest rates, focusing instead on its commitment to achieving price stability in the medium term and closely monitoring domestic and international developments to use its tools accordingly. The Consensus is for 100 basis points of cuts by year-end.

The next meeting will be held on 5 July.

Commenting on the outlook, ING’s Stefan Posea and Valentin Tataru stated:

“We expect the Bank to start cutting in August, together with its quarterly inflation report and deliver no more than 50bp of rate cuts by year-end, in a data dependent manner. We keep our view that strong consumption, high wage growth, fiscal slippage and the external context will prevent the Bank from delivering more than a cautious easing cycle, at least in the near term.”

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