Analysts expect more rate hikes but stable currency in Romania

The monetary policy interest in Romania will rise by 1pp to 5.75% at the monetary policy board on August 5 and by another 1.25pp in the other two boards held by the National Bank of Romana (BNR) before the end of the year, according to Raiffeisen Bank Romania analyst Ionut Dumitru.

ING Romania chief economist Valentin Tataru shares Popescu's expectations for a 1pp rate hike on August 5.

The policy rate in Romania lags not only behind the rates in other countries in the region but also behind the money market interest rates, Tataru argues, according to Economica.net. This stands for the liquidity issues in the market, he explains, adding that it is not mandatory that the policy rate converges to the money market rate.

ING Bank estimates the inflation at the end of 2022 at 13.0%, compared to BNR's 12.5% projections. The inflation will ease to 7.0% at the end of 2023, again slightly more than BNR's projection (6.7%).

However, the exchange rate is seen as stable.

"Speaking of the currency, the recent slight appreciation of the RON should be cheered by the BNR, as it helps price stability. However, a more significant appreciation of the RON would be fundamentally unsustainable and likely not favoured by the BNR. We maintain our estimate for RON to EUR to close the year close to 4.95 [where it is now]," says Tataru.

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