A More Gradual Approach to Rate Normalization in Romania than at Other Eastern European Central Bankers

January 10, 2022

Romania’s policy interest rate was raised only 25 basis points after the first monetary policy review of 2022 even though total CPI inflation of 7.8% is more than twice the 3.5% target ceiling, core inflation has also risen, and both measures are projected to crest further in the short run. Today’s increase to 2.0% follows similar quarter percentage point hikes in October and November and brings the rate level to its highest point since March-May 2020. A statement from the National Bank of Romania Board justifies this gradualist normalization of monetary policy because of the elevated level of uncertainty overhanging Romania’s economy and in light of a sharp and progressive deceleration of economic activity during the second half of last year.

Other Eastern European central bankers have been more aggressive those on the NBR Boardin reversing monetary gears. The two-week Czech repo rate was increased from 0.25% to 3.75% between June and December of last year. Hungary’s central bank rate target was lifted to 2.1% by the end of 2021 from 0.6% in early June, and Poland’s central bank rate is now 2.25% versus 0.10% at the start of 4Q 2021. The next policy review in Romania will be on February 9th.

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

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

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