The Second Romanian Interest Rate Hike in as Many Months

November 10, 2021

The National Bank of Romania‘s November policy meeting this week resulted in a second consecutive 25-basis point policy rate hike, which at 1.75% is at its highest level since May-August 2020 but still 75 basis points below the pre-pandemic level. The NBR’s deposit rate was left unchanged at 1.0%, but the lending facility rate has been lifted 50 bps to 2.5%, creating a symmetric band around the policy rate. Inflation in Romania has accelerated from 2.9% in June to 3.6% in September and 7.0% last month. That’s well above the medium-term target corridor of 1.5-3.5% of Romania’s central bank, and many analysts were anticipating that officials would authorize a 50-basis point increase. A released statement attributes the climb of inflation to “exogenous” factors that are still at play: “The updated forecast shows a significant additional worsening of the inflation outlook almost throughout the projection horizon, under the strong impact of supply-side shocks, as the forecasted path of the annual inflation dynamics has been again revised considerably upwards, especially over the short term.” Short-term inflation expectations have moved higher. The hope to normalize monetary policy may need to be stepped up in coming months.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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