Romania expected to end monetary tightening cycle with 25bp hike on January 10

Romania expected to end monetary tightening cycle with 25bp hike on January 10
/ bne IntelliNews
By Iulian Ernst in Bucharest January 9, 2023

Romania’s monetary authority, the National Bank of Romania (BNR) is expected to hike the refinancing rate by 25bp to 7% in the last step of the monetary tightening cycle on January 10.

However, as banks rarely rely on refinancing and even less on Lombard money, the policy rate’s effectiveness is seriously questioned.

“We strongly favour a 25bp hike to 7.00% against a decision to keep the key rate unchanged. In any case, markets could be quite indifferent to the decision, as the context of ample liquidity significantly dilutes the relevance of the policy rate,” said Valentin Tataru, chief economist of ING Bank Romania, quoted by Economica.net.

Since the headline inflation is not likely to ease below 10% by the end of the year, the BNR will most probably keep the monetary policy rate at 7% for at least a year. 

The latest rate hike last November disappointed analysts, who saw the 25bp step at that time as insufficient for taming inflation.

Analysts expect the headline inflation to ease through 2023 after it peaked at around 17% at the end of last year. December inflation will be published on January 13.

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