BNR board member says talking about interest rate cuts is premature

"I cannot say that we have won the whole war against inflation," said Cristian Popa, member of the Board of the National Bank of Romania (BNR), speaking at the International Economic Conference of Sibiu.

He stressed that talking about interest rate cuts is premature.

"It may sound counterintuitive, but the effort to bring inflation from 5% to 2.5% may be higher than the one to bring it from 15% to 5%," Cristian Popa said, according to Economica.net. Currently, the headline inflation is still in the double-digit area.

BNR has tightened monetary policy by raising the refinancing rate from 1.25% in August 2021 – when post-Covid inflation picked up – to 2.5% in February 2022 when Russia invaded Ukraine, to later gradually hike the policy rate up to 7% in January this year amid energy and food price inflation. Analysts expect a steady monetary policy by the end of the year.

"The war [against inflation] will continue and could be a lasting one. We will not soon return to the low interest rates [that we witnessed until] a couple of years ago. There are structural changes in the global economy that create inflationary pressures," Popa said.

BNR doesn't expect the headline inflation to enter the 2.5%+/-1pp target band until the end of March 2025 – which is the end of the two-year forecast horizon under the latest Inflation Outlook.

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