After 8 rate hikes, National Bank of Romania interest rate amounts to 7%
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The main interest rate in Romania just went up by 25 bps to 7%. And just a moment ago it was at the same level as in Poland...
Is this an announcement of interest rate hikes in Poland? Perhaps. A country from our region raised interest rates today. It's about Romania. The main rate went up by 25 bps to 7%.
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Is this the last price hike in Central Europe?
The main interest rate in Romania is 7% from today. It went up from 6.75%. In 2022, the National Bank of Romania raised it 8 times, from 1.75%. Inflation in the country with the capital in Bucharest exceeds 16% y/y.
Main interest rate in Romania
Source: Trading Economics
Generally, analysts polled by Reuters expected a 25 bp hike. “We believe that this is the last meeting of the central bank in the Central European region with a rate hike,” even ING group analysts stated.
Fundamentals were in favor of an increase
Erste Group analysts assumed that interest rates in Romania would not change. “We expect the interest rate to remain unchanged at 6.75%. It will be a difficult choice, however, given the recent inflation figures that surprised to the upside, as well as solid economic performance. Moreover, the ECB's hawkish tone, which has led to an overestimation of the eurozone's interest rate outlook, is another argument for the hawks. In our opinion, however, a hike of 25 bp . would bring little benefit and would be inconsistent with the recent easing of monetary conditions. In addition, the dovish wing of the Romanian bank will be looking at other central banks in the region, especially in Poland. On the other hand, a sizeable current account deficit should require higher real interest rates in Romania. Overall, economic fundamentals favor another rate hike, while technical considerations favor a no change decision.
As you can see, "fundamental considerations" won out in Romania.
Romania - inflation
Source: Trading Economics
Main rates in the CEE region
Source: Erste Group
