Most of the chief economists in the Romanian commercial banks expect the National bank of Romania (BNR) to increase by 50 basis points the key interest rate in the monetary policy meeting on October 5.

The dispersion of their expectations is, however, relevant since some of them expect a more moderate 25bp step while others don't rule out a hawkish 75bp step.

The median is, however, 0.5bp, leading to a refinancing rate of 6%.

"We expect BNR to raise the key policy rate by 50bp to 6.0% at the October 5 Board meeting. There is a significant likelihood of a 75bp increase after August inflation figures came in above the BNR forecast. The median of the Bloomberg survey is +50bp," said Ciprian Dascălu, chief economist of BCR Erste Bank, Economica.net reported.

Analysts expect BNR will further hike the rate to 6.25% - 6.5% to tame inflationary expectations.

The International Monetary Fund (IMF) Board agreed that "policy rates will need to rise further to prevent the entrenching of inflationary pressures and the emergence of a wage-price spiral," according to the Conclusions to Article IV Consultations with Romania.

Inflation peaked at around 15% YoY in June-July to ease just above 14% YoY in August. BNR projects year-end inflation at 13.9% (and 7.5% at the end of 2023), but a revised version of the Inflation Outlook will be reviewed and published by the monetary board on October 5. 

iulian@romania-insider.com

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