Romanian analyst Andrei Radulescu, local lender Banca Transilvania’s senior economist, has managed to surprise everyone with his forecast that the European Central Bank (ECB) will start raising interest rates in early 2018.

Radulescu’s is the most divergent forecast in a Bloomberg survey as most international analysts expect the ECB to continue its low-rate policy at least until the first half of 2019.

The ECB president Mario Draghi (opening photo) himself said recently that the interest rates will remain low for an extended period of time and that the Eurozone’s central bank will continue its bond-buying program, an instrument used to inject liquidity in the Eurozone’s economy until the recovery signs will be more visible.

The Romanian analyst’s forecast has surprised everyone, and Bloomberg has even written a piece on him, called The Transylvanian Take on ECB Policy.

“What's the distance between Frankfurt and Cluj-Napoca, Romania? 1300 kilometers, or 130 basis points,” the Bloomberg article begins. “That's the gap between the median forecast on where the European Central Bank's deposit rate will be by the second quarter of 2019, and the most divergent forecast in a Bloomberg survey,” the article continues.

Andrei Radulescu is presented as “an economist who watches the ECB from the forested mountains of Transylvania.”

However, the author points out that it’s worth keeping an eye on the outliers as the big-bank analysts have often been proved wrong.

“In March 2016, when the ECB cut the benchmark rate to zero, no one forecast the move. In September 2014, when the ECB reduced the benchmark rate to 0.05, only six out of 57 economists predicted the change. Radulescu, Banca Transilvania's senior economist, sees himself in that club.”

When predicting that interest rates for the euro will start increasing sooner, Radulescu takes into account the inflation rate in the Eurozone as well as the signals that the U.S. Federal Reserve may start tightening its monetary policy as early as this year, which would also impact the ECB’s monetary policy.

editor@romania-insider.com