JP Morgan sees Romanian central bank as excessively dovish

Because it acted too little and too late, Romania's central bank BNR will have to increase the refinancing rate not only next year but also in 2023 - up to 5.5%, according to a research report of JP Morgan consulted by Ziarul Financiar daily.

At the November monetary board meeting, BNR hiked the interest rates by only 0.25pp, from 1.5% to 1.75%, while the market expected a 0.50pp increase. BNR then sacrificed inflation to support the economy and lending, which began to decline in Q4, JP Morgan's analyst Nicolaie Alexandru-Chidesciuc concluded.

At the January 10, 2022 monetary board meeting, BNR could increase the policy interest rate by 0.5%, according to the report.

But it's not going to be enough. According to the latest inflation report, BNR believes it could bring inflation back to 3%, the central bank's target, in Q3, 2023. According to JP Morgan, BNR remains overly optimistic.

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