Romania keeps monetary policy rate at 6.5%

In line with broad consensus, Romania's central bank (BNR) decided to keep interest rates unchanged at 6.5% in the May 16 meeting.

Amid persistent inflation (5.3% y/y CORE2 inflation in March-April) and fiscal uncertainties, analysts expect the first rate cut no sooner than this autumn. Disappointing growth and monetary policy stance of the ECB and peer countries could trigger such a decision sooner rather than later, according to an Erste Bank Group report. On the contrary, fiscal concerns, increased FX vulnerability due to elevated risk premia and sovereign rating risks, as well as high and mostly upside inflation forecast uncertainties, could ultimately outweigh them in favor of a more hawkish stance.