The policy rate hike came just in time because "it coincides with a political crisis that seems to be far from reaching its end," said Dan Suciu, spokesperson of the National Bank of Romania (BNR). According to Bursa.ro, he made the statement at TV station Digi24 hours after the monetary board hiked the refinancing rate by 25bp to 1.5% on October 6 in a move that in part surprised the markets.

The political crisis coincided with (and didn't cause) the rate hike, Suciu said - which can be interpreted that it will be factored in at the next monetary policy Board in November. He indeed confirmed that further steps toward more hawkish policies depend on, among others, the political developments.

The central bank needs a Government operating in full capacity to secure price stability, he said, implying that further political turmoil will increase the likelihood of a higher cost of money.

A possible further increase in the key interest rate at the next monetary policy meeting in November will depend on the economic parameters that support or not such a decision and obviously on the resolution of the political crisis, he explained.

"We rely a lot on how this interest rate increase will be absorbed, on the one hand; on the other hand, [we depend] on the other economic parameters that support a possible further increase and obviously on the settlement of the political crisis - because we expect to work together with a government on the mix of (economic) policies [...]," the BNR official said. 

iulian@romania-insider.com

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