Romania’s central bank keeps monetary policy at 6.5%, citing high short-term inflation expectations

In line with the consensus expectations, the National Bank of Romania (BNR) on January 19 kept the monetary policy rate at 6.5%. With headline inflation close to 10% since August after a supposedly one-off price shock expected to be muted by demand-side drivers, the monetary authority is unanimously expected to cut the rate down as soon as a steady disinflationary trend is identified – not necessarily after the headline inflation eases down in July-August.

However, such a disinflationary trend is not yet visible despite a slight decline in the headline inflation to 9.7% y/y in December from 9.9% y/y in September. The annual adjusted CORE2 inflation rate continued to pick up during Q4, climbing to 8.5% in December from 8.1% in September.