Romania: National Bank of Romania holds again in November
Decision largely expected by markets: At its last meeting of 2024 on 8 November, the National Bank of Romania (NBR) decided to maintain the monetary policy rate at 6.50%, the lending (Lombard) facility rate at 7.50% and the deposit facility rate at 5.50%. The decision was in line with market expectations and marked the second consecutive hold.
Sticky inflation and heightened uncertainty drive the decision: The Central Bank’s decision was chiefly driven by a slower-than-previously-anticipated decline in inflation during Q3, a trend which the Bank expects to persist into 2025; the NBR now forecasts inflation to remain above its 1.5–3.5% target band until 2026. The Bank also highlighted significant uncertainties regarding the outlook for both inflation and growth, including concerns about the country’s capacity to absorb EU funds and, externally, escalating geopolitical tensions—likely also linked to the outcome of the recent U.S. elections.
Bank to ease its stance further in 2025: The Bank’s communiqué was void of explicit forward guidance but reiterated its commitment to “ensure and maintain price stability over the medium term, in a manner conducive to achieving sustainable economic growth”. Our panelists expect the easing cycle to resume in 2025, forecasting cumulative rate cuts of between 50 and 200 basis points during the year.
The Bank will reconvene on 15 January 2025.
Panelist insight: Commenting on the release, analysts at Erste Bank stated:
“We see the next NBR rate cut in the second quarter of 2025, though the interest rate outlook is a function of the structure, timing, and size of the widely expected fiscal consolidation package, which should be presented by the new government after the general and presidential elections. Provided that the structure of the fiscal adjustment weakens the domestic demand pressures, there could be room for the NBR to cut rates in the first quarter”
Stefan Posea and Valentin Tataru, analysts at ING, stated:
“At this stage, we are not changing our call of a total of 100bp of rate cuts next year. However, […] we now don’t expect any rate cut until the second quarter of 2025. What’s more, the Bank might be preparing the ground to use liquidity management again in steering market rates.”