The National Bank of Romania (BNR) kept its key monetary policy rate at 7% for the seventh consecutive meeting in November, in line with market expectations. The rates to deposit and credit facilities remained at the 6% and 8%, respectively.
Board members were of the unanimous opinion that the reviewed context overall warranted keeping the monetary policy rate unchanged, with a view to bringing the annual inflation rate back in line with the 2.5% ±1 percentage point flat target on a lasting basis, by anchoring medium-term inflation expectations, in a manner conducive to achieving sustainable economic growth.
Romania’s annual inflation rate eased further to 8.07% in October 2023 from 8.83% in the previous month, almost in line with market expectations of 8.15%.
The minutes of the Monetary Policy Meeting of the BNR Board showed that the annual inflation rate would shrink to 7.5% in December 2023, similarly to the prior forecast, but would go up at the onset of next year, before declining gradually to 4.8% in December 2024 versus the previously-projected 4.4%. It would then accelerate its drop in 2025, falling to 3.3%, in the upper half of the variation band of the target, at the end of the projection horizon, i.e. in September.
Meanwhile, financial analysts part of CFA Romania project a 6.28% inflation rate for the 12-month horizon (November 2024).
“The disinflationary process will continue, but at a much slower pace, with inflation being projected to remain above 6% at the end of 2024, and tax policy remaining the main risk to the disinflationary process,” according to Adrian Codirlasu, vice-president of the CFA Romania Association.
Regarding the EUR/RON exchange rate, over 76% of the participants are expecting a depreciation of the leu (RON) in the next 12 months. Thus, the average value of expectations for the 6-month horizon is 5.0097 lei to the euro, while for the 12-month horizon, is RON 5.0541 to the euro.
