May 3 (SeeNews) - Global risk aversion creates a window for a rate hike from Romania's central bank, BNR, at its monetary policy meeting on May 7, Austria's Erste Group said on Thursday.
"BNR surprised markets at its latest April meeting by holding the policy interest rate steady and continued its series of surprise moves by introducing full sterilization of the excess liquidity on April 16th. This time around, that is for its upcoming meeting on May 7th, we think there is scope for the central bank to acquiesce to the consensus view of a policy rate hike," Erste said in an e-mailed short note on Romania.
On of the arguments for BNR to do so is the slight upside surprises in first quarter inflation outcome, along with potentially higher-than-expected oil price developments may imply a slight upwards revision for this year’s headline CPI inflation, Erste analysts said.
"Even if that were not the case, the current 3.5% forecast, its balance of risks which is tilted to the upside, as well as the CORE inflation’s upward trending forecast are enough grounds to support a policy move," they added.
Romania's annual consumer price inflation quickened to 5.0% in March from 4.7% in February, according to the most recent data published by the office of national statistics.
Also, the analysts said, the liquidity absorption operations could be a signal by themselves, preparing for a policy rate move that would matter, unlike those from early on in the year, which failed to lift money market rates due to the high excess liquidity.
In Erste's view, BNR could also be pushed to act because of the external context, which seems more favourable to absorb higher Romanian leu rates, given the last couple of weeks reversal of the dollar's weakness and the depreciation trend of emerging market currencies, including those in the CEE region.
"Such a context would prevent RON from strengthening significantly after a rate hike and even if it did, the central bank would have the flexibility to loosen its liquidity management to fight such appreciation."
On April 4, BNR decided to keep its monetary policy rate at 2.25% - contrary to most analysts' expectations. BNR last changed the key rate in February, when it raised it by 25 basis points to 2.25%, the second rate hike this year.
(1 euro=4.6618 lei)