March 31 (SeeNews) - Romania’s central bank, BNR, is likely to hold its policy rate at 7% at its April 4 board meeting and through 2023, in line with broad consensus, Austria’s Erste banking group said on Friday.
The BNR is unlikely to announce the end of the tightening cycle given the high forecast uncertainty and will likely reiterate its dependency on data, Erste analysts said in a short note on Romania.
In the analysts’ view, the BNR could reference its growing discomfort with the Romanian leu’s strengthening bias over the past few months, which was met by the bank with loosening liquidity management to discourage carry trades and foreign exchange interventions.
Romania’s inflation quickened to 15.5% on the year in February from 15.1% in January, above Erste’s forecast of 15.3%.
Core inflation peaked in February at 15.1% and is seen to decline at a slower pace than the headline over upcoming quarters. This indicates persistent inflationary pressures which should prevent a dovish pivot from BNR, despite its governor not having ruled out rate cuts once inflation drops to the key rate level.
Liquidity management is likely to be employed by BNR over the coming quarters, depending on the performance of the Romanian leu against the euro and upcoming inflation readings. Interest rates tied to the Romanian leu money market are seen to trade within the central bank’s standing facilities corridor of 6% to 8% throughout 2023.
The BNR kept its monetary policy rate unchanged at 7% in February after a dovish hike of 25 basis points in January.
(1 euro=4.9491 lei)