At the monetary policy meeting of January 15, Romania’s central bank (BNR) maintained the monetary policy interest rate at 6.5%, which was in line with expectations. 

Amid persistent inflation risks and with no budget plan drafted by the government, the monetary authority thus prioritized a cautious stance over the need to encourage economic growth. 

“We expect BNR to resume cutting rates in August and deliver three key rate cuts of 25bp each to 5.75% by end-2025,” according to an Erste Bank research note.

The BNR cut the policy rate during the summer of 2024 by 0.5 percentage points from the 7% level maintained during 2023 and half of last year.

Romania’s consumer prices increased by 0.3% m/m in December, resulting in a 5.14% y/y headline inflation, marginally faster compared to the 5.11% y/y in November and 1.5 percentage points lower compared to 6.6% y/y one year earlier. For the end of 2025, the central bank projects a 3.5% y/y year-end inflation rate.

The new inflation assessments mentioned by the central bank in its monetary policy decision note reconfirm the prospects for the annual inflation rate to decline in the first three months of 2025, yet on a higher-than-previously-anticipated path.

The latest data and analyses point to moderate quarterly economic growth in 2024 Q4, in line with previous forecasts, as well as to mixed developments across the main aggregate demand components and major sectors compared to the same year-ago period, the central bank admitted.

iulian@romania-insider.com

(Photo source: Lcva/Dreamstime.com)