Romania’s central bank, the National Bank of Romania (BNR), kept the refinancing rate at 7%, at its May 10 board meeting in line with consensus expectations, balancing positive developments — robust economic growth in Q1 — with rising uncertainty prompted by the government’s fiscal policy and actions related to using Resilience Facility funds.

The decision will have a marginal impact on markets, particularly as the BNR hinted that the revised inflation projection, to be published on May 12, is not much different from the forecast sketched in February. Like the BNR itself, investors will stay alert to the executive’s actions, particularly in the context of an expected rise in financing costs in the region amid the crises in the banking systems in the US and Switzerland.

The updated forecast broadly reconfirms the coordinates of the previous medium-term projection. “The annual inflation rate will probably remain on a downward path almost similar to that envisaged earlier, dropping to a one-digit level in 2023 Q3 and staying near the variation band of the target at the end of the projection horizon,” the BNR’s press release reads.

Besides the fiscal developments and the progress with the National Recovery and Resilience Plan (PNRR), the steps taken by monetary authorities in the region and in major financial markets are mentioned as relevant for the BNR’s monetary policy decisions.

Headline inflation declined in Q1, for the first time in the past nine quarters, the monetary authority pointed out. Core inflation returned, in March, to the same level as it was in December after it eased in the third month of the year. Measured by HIPC standards, the inflation in Romania increased to 13.2% in March from 12.0% in  December — while remaining lower compared to peers in the region and the Baltic states.