BUCHAREST – Romania’s central bank on Friday raised its benchmark interest rate through 75 fundamental issues to 5. 50 percent, according to market expectations, as it expects inflation to stabilize in the third quarter and the economy to slow.
After the eighth consecutive hike since October, Romania’s benchmark rate remains the lowest among its Central European peers, even as the bank has accelerated the pace of adjustment in recent months, to narrow the loan charge gap.
In July, the bank rose one percentage point, the highest in more than a decade, and Gov. Mugur Isarescu said the tightening speed would slow once inflation began to fall.
“The latest data and research imply a virtual shutdown of economic activity in the present and third quarter of 2022, under the influence of the war in Ukraine and related sanctions,” the bank said on Friday.
“The evolution of GDP in the current quarter implies a marked fall in its annual rate of expansion. “
Analysts polled through Reuters, who had forecast a percentage point on Friday, had expected annual inflation to peak at 15. 05 percent in June but remain in double digits at most next year.
They see inflation of 13. 9 at the end of this year and 8. 0 at the end of 2023, above the central bank’s current forecast of 12. 5 and 6. 7 Array respectively.
The bank, which will release new forecasts on Tuesday, said it expects inflation to stabilize and “gradually decline later on, but on an upwardly revised path. “
Policymakers relied on the company’s controls on market liquidity to push market rates above the benchmark, which had the effect of tightening financial conditions.
On Friday, the bank raised its credit line from 5. 75% to 6. 50% and its deposit from 3. 75% to 4. 50%.
“We the magnitude of the issues increase less in this assembly and it is more an ongoing commitment to harden even more,” Deutsche Bank said in a study note.
The central bank has two more meetings on rates scheduled for this year. The Romanian leu is strongly opposed to the euro, unchanged from pre-political levels.
Elsewhere in the region, the Czech National Bank (CNB) kept interest rates unchanged on Thursday, the first in the region to end an adjustment cycle. (Reporting via Luiza Ilie Editing via Mark Potter)
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