It is not a matter of if, but a matter of how much - according to most analysts commenting on the National Bank of Romania's November 9 monetary policy decision. Under the consensus forecast, BNR will hike the rate by 50bp to 2%.

There is a broad consensus over the negative impact of the higher interest rates on the retail sales, as well, starting with the last quarter of this year. Another open question regards the central bank's monetary policy during 2022, when the economic growth is expected to slow down, making such hawkish steps more costly.

"Romania has been very conciliatory until recently but launched a tightening cycle in October with a 25bp move. We expect an increase of 50bp at the next meeting [on November 9] and 25bp at each of the next meetings, until we reach 3.00%," according to ING Bank Romania's chief economist Valentin Tătaru, quoted by Economica.net.

Raiffeisen Bank chief economist Ionut Dumitru argues that "we can agree that inflation has gotten out of control". This, coupled with the expected budget deficit consolidation, can only lead to higher interest rates in general. Dumitru points to the Czech National Bank (CNB), which, for similar reasons (to keep prices under control), has decided to increase by 125bp the refinancing rate, in the most significant increase in the cost of credit since 1997.

All the central banks in the region operated rate hikes recently, most of them of higher magnitude than expected, and Romania is leading in terms of inflation - therefore can not escape the trend. From 6.3% in September, the headline inflation in Romania is expected to accelerate to 7% in November-December. 

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iulian@romania-insider.com