Shared expectations ahead of October 4 monetary board meeting in Romania

Analysts are divided ahead of the October 4 monetary board meeting of the National Bank of Romania (BNR), with only some of them expecting a 25 basis point (bp) cut to 6.25%

The median Bloomberg poll, cited by BCR chief economist Ciprian Dascălu, predicts no change, with 11 out of 19 respondents seeing stable rates, while the rest expect a 25bp cut. BNR cut the policy rate for the first time in July (-25bp) after it kept it at 7% since January 2023 to fight inflation, which is expected at just over 4% y/y by the end of this year, Economica.net reported.

"We are in the camp of those who expect a rate cut, although we see a material probability (some 30%) for no change," states Dascălu. He said he also expects another 25bp rate cut in the last board meeting this year on November 8, "Provided the external environment remains benign and the domestic political scene does not deteriorate ahead of the presidential and general elections."

Even under this scenario, assuming 4% year-end inflation as expected by BNR (subject to revision), the monetary policy will de facto tighten.

On a more moderate note, Valentin Tătaru, chief economist of ING Bank, believes that the key interest rate will remain at 6.50% until the end of the year.

The lending has gained momentum and the fiscal stimulus remains robust, he argues. "We believe that the likelihood of another rate cut this year is negligible," he stated.

Somewhere in between, Ionuț Lianu, Head of Asset and Liability Management CEC Bank, argues that the key interest rate would decrease to only 6.25% by the end of the year under the base scenario – while there are significant odds for two cuts.

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