The National Bank of Romania (BNR), in its November 8 Board meeting, kept unchanged the monetary policy interest rate at 7%, a measure broadly expected, particularly as the inflation outlook has deteriorated slightly after the endorsement of the fiscal package that will create inflationary pressures in January.

The policy rate thus remains at the same level where it was brought in January, at a time when the consumer price inflation was 15% y/y.

As of September and Q3, the price dynamics still show decreasing inflation, but the BNR said it revised upwards the price trajectory for 2024 while envisaging steeper price moderation in 2025 under a scenario to be published on November 10.

The annual inflation rate went down to 8.83% y/y in September, in line with forecasts, from 9.43% in August amid the deceleration in the growth rate of processed food prices and the faster annual decline in energy prices. In Q3, the 12-month inflation rate continued, therefore, to drop, albeit at a slower pace than in the previous two quarters, shedding 1.42 percentage points (pp) from 10.25% y/y in June. 

The updated forecast reconfirms the outlook for a further fall in the annual inflation rate over the next two years, albeit on a higher-than-previously-envisaged path in 2024, yet slightly lower during the subsequent quarters.

Specifically, the annual inflation rate is expected to go up at the onset of 2024 – under the impact of the increase and introduction of some taxes and charges –before declining gradually over the following quarters, but to accelerate its drop in 2025, falling inside the variation band of the target at the end of the projection horizon.

iulian@romania-insider.com

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