Romania’s central bank raises the monetary policy rate to 3%

Romania’s National Bank (BNR) decided, on April 5, to increase the monetary policy rate from 2.5% to 3% per year to counter the rising inflation in the first two months of 2022. The increase is in line with the analysts' expectations.

“The annual inflation rate continued to rise gradually in the first two months of 2022, contrary to expectations, climbing to 8.35% in January and to 8.53% in February, from 8.19% in December 2021,” BNR wrote in a press release.

“This time round, the exogenous CPI components had a disinflationary contribution overall, following the slower pace of increase of electricity and natural gas prices, amid a base effect and extended price capping schemes, which outweighed considerably the influences of the relatively more pronounced hike in fuel prices, VFE prices and administered prices,” it explained.

The central bank expects inflation to rise somewhat more steeply in the coming months than anticipated in February, under the impact of supply-side shocks.

“Behind the renewed worsening of the near-term inflation outlook stand the much higher increases expected for fuel prices, and especially for processed food prices, mainly due to the stronger advance in crude oil and agri-food commodity prices, amid the war in Ukraine and the international sanctions in place. The inflationary effects thus exerted are foreseen to prevail in the near term over the substantial disinflationary impact presumably generated by the one-year extension of capping schemes for electricity and natural gas prices for households. However, significant uncertainties are still associated with how the impact of these schemes is assessed and included in the CPI calculation,” BNR explained.

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