Analysts surveyed by Economica.net expressed expectations for the National Bank of Romania (BNR) to keep the monetary policy rate at 6.5% at the monetary policy meeting on February 14, expecting more clarity from the fiscal and budgetary policies.

Analysts expect the central bank to keep the key rate at 6.5%. The BNR could continue to cut the key rate in 2025, but probably only in the second half of the year, and not by much, due to fears of inflation and taxation.

Rate cuts are expected for the second half of the year when, depending on the budget execution and the inflation, the monetary policy rate could be reduced gradually to 6% or even 5.75%, according to the analysts of the main Romanian banks.

"Probably, if in the second half of the year the budget deficit shows that it has a chance to fall within the established target [7% of GDP] and not derail towards 8% of GDP, and inflation does not increases, there is room for monetary policy interest rate decreases in the second half of the year, possibly to 6% at the end of the year. If inflation were to fall below 5%, we could also see a key interest rate of 5.75%," explains Adrian Codirlasu, president of the CFA Society.

For his part, Valentin Tataru, chief economist at ING Bank, says: "With inflation likely to remain around 5.0% throughout 2025, GDP growth below potential, and a still unclear fiscal outlook, we believe that the National Bank of Romania will maintain the key interest rate at 6.50% at least until the second quarter of the year while maintaining the relative stability of the exchange rate."

Anca Negrescu, senior economist at UniCredit Bank, says that given that the headline inflation will likely remain above 4% throughout the year, the central bank's space to reduce the monetary policy interest rate "will be quite limited, to a maximum of one percentage point in 2025." This would bring the policy rate to 5.5%.

Ciprian Dascălu, chief economist of BCR, in turn, confirmed broad expectations for no change in the monetary policy on February 14, adding that "we expect the BNR to resume rate cuts in August and to make three key interest rate cuts of 25 bp each to 5.75% by the end of 2025, with the risk of smaller cuts depending on fiscal and political developments."

The BNR is set to present its updated inflation forecast, which should see an upward revision in the short term with a more persistent outlook for core inflation. 

"We currently expect a CPI of 3.7% y/y by the end of the year, and core inflation at 4.0% y/y," Dascălu emphasizes.

The BNR Board of Directors meets on February 14, in the second monetary policy meeting of 2025, after only two key interest rate cuts were made in 2024, to 6.5%.

iulian@romania-insider.com

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