ING Bank estimates that the National Bank of Romania (BNR) will maintain the key interest rate at 6.50% at the meeting on January 15 due to persistent inflationary risks, according to a bank's research note. The position tends to reflect consensus expectations.

"While economic growth concerns are not to be taken lightly, we think the Bank will need to see its risk heatmap turning less red before proceeding again with its cautious easing cycle," the report reads.

In this context, ING estimates that the monetary policy interest rate will be reduced by the National Bank by only 50 percentage points in 2025, in the second half of the year, which will bring the key rate to 6.0%. 

"We believe the bank will wait for more clarity on the inflation and fiscal outlook before continuing its cautious easing cycle." 

According to the bank's analysts, given the increased risks to both inflation and economic activity, it is likely that policymakers will adopt a wait-and-see attitude until more certainty emerges on the macroeconomic front.

ING analysts believe that there are several factors at play, most of them with increased inflationary impact or risks, to which the BNR is also paying special attention: last year's drought continues to leave its mark on food inflation, a less stimulating but still uncertain fiscal policy, the increase in fuel excise duty starting January 1, rising oil prices and robust consumer demand.

In addition, there are significant uncertainties regarding the capping of energy prices and/or the removal of the cap on the trade markup for basic food products. There will also be uncertainties regarding the increase in the tax burden this year, particularly to what extent companies can pass it on in prices.

The BNR Board of Directors maintained the interest rate at 6.5% at the November 2024 meeting, a level it has been at since August 2024.

iulian@romania-insider.com

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