WOOD Flash – Romania macro: NBR on a prolonged pause

At its meeting yesterday (4 April), the Board at National Bank of Romania (NBR) decided to keep the policy rate unchanged at 7.00%, in line with expectations. Having paused since the beginning of the year, the bank has not yet officially called an end to the tightening cycle, but it has conveyed subtle signals, along the way, which remain consistent with broad rate stability ahead. According to the data as of March, the economy is preserving considerable momentum on the back of steady private consumption, and is on track to outpace its peer economies this year. Inflation is developing above the bank’s February forecast and is likely to result in an upwards revision in the next forecast round in May. We no longer expect a further 50bp increase in our baseline, but still consider it plausible to bring inflation back sustainably to the 2.5% target in a timely manner. Looking ahead, we expect the policy rate to remain on hold this year, before being cut by 100bp to 6.00% next year, with the easing window opening from the spring.