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.

andrei@romania-insider.com

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