Romania’s monetary authority, the National Bank of Romania (BNR), is expected to hike the refinancing rate by 25bp to 7% in a last step of the monetary tightening cycle on January 10.

But as banks rarely rely on refinancing or even less on Lombard money, the policy rater’s effectiveness is seriously questioned.

“We strongly favour a 25bp hike to 7.00% against a decision to keep the key rate unchanged. In any case, markets could be quite indifferent to the decision, as the context of ample liquidity significantly dilutes the relevance of the policy rate,” says Valentin Tataru, chief economist of ING Bank Romania, quoted by Economica.net.

However, since the headline inflation is not likely to ease below 10% by the end of the year, BNR will most probably keep the monetary policy rate at 7% for at least a year.

The latest rate hike last November (by 25bp) disappointed analysts who saw the 25bp step at that time as insufficient for taming inflation.

Analysts expect the headline inflation to ease through 2023 after it peaked at around 17% at the end of last year. The December inflation will be published on January 13.

iulian@romania-insider.com

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