Romania’s central bank raises its refinancing rate by 75bps to 3.75%; more soon


On May 10, the National Bank of Romania (BNR) increased the monetary policy interest rate by 75 bps to 3.75% and announced that the updated forecast, which will be published on May 12, shows a significant further deterioration in the inflation outlook. The Lombard interest rate thus reached 4.75%.

The rate hike may not be disappointing on its own, although analysts thought a 100 basis point hike was also possible, but the final level of the refinancing rate, in the inflationary environment (rate of persistent double-digit inflation) and compared to other peer monetary authorities in the region (5.25% in Poland, 5.75% in the Czech Republic), seems insufficient. Thus, the rise in interest rates will predictably increase the cost of financing (including for the State), while on the other hand, (ex-ante) interest rates on deposits remain negative.

More specifically, the annual inflation rate (10.2% in March) should accelerate its growth in the second quarter and decline only gradually over the next four quarters, but more sharply thereafter. As a result, inflation momentum is likely to climb significantly above previously forecast levels and fall to single-digit levels at the earliest in the second half of 2023, remaining above the target band at the end. of the projection horizon, indicates the BNR in the note published with the monetary policy decision.

With regard to economic growth, the BNR indicates that the latest statistical data and analyzes point to a slight re-acceleration of economic growth in Q1, followed however by a virtual halt in Q2, under the impact of the war. in Ukraine and the associated sanctions.

The next regular meeting of the monetary council is scheduled for July 6. The BNR is very likely to make further rate hikes this year, and an extraordinary meeting may be needed to fine-tune monetary policy before early July.

“We see the terminal rate at 5.50% for the key rate and 6.50% for the credit facility by the end of this year,” Erste Group says in a note to investors sent with the hike decision. BNR rates.

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(Photo source: Vlad Ispas/


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