ING sees Romania's yearend inflation at 7.4%, rate cuts not totally impossible

The headline inflation in Romania will reach 7.4% with downside risks, and the key rate will remain at 7%, although a certain rate cut is not fully excluded, according to ING Bank Romania chief economist Valentin Tataru.

Base effects, the energy price ceilings and the stabilization of international energy and food prices are pushing the inflation readings down, while upward forces include cost increases that have not yet been fully passed through to the consumer prices, wage pressures and still negative real rates, he explained, according to Economica.net.

As regards the interbank market rates, important for the retail loan interest rates, Tataru believes that "a minimum was reached", but the prices will not necessarily bottom out.

"We expect stability around current levels. The liquidity situation is more likely to remain accommodative, although the surplus could reduce to more manageable levels. Should the inflation trajectory surprise (even slightly) downward, we would not rule out a modest rate cut by the end of 2023," he stated.

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