At the secondary monetary policy meeting of 2025 the Board of the National Bank of Romania (NBR) updated the mid-run macroeconomic scenario (to be published within the Quarterly Report on Inflation on
17 Feb) and kept the monetary policy rate (at 6.50%) and the MRRs (8% for RON and 5% for FX), decision in line with our and market consensus.
According to the Statement of the meeting, released this afternoon, the forecasts for inflation were revised on the upside for 2025 (also taking into account the short-term inflation expectations, influenced by the dynamic of the wages), and slightly on the downside towards the end of the forecast horizon. In this scenario, inflation would continue the deceleration trend, to enter the target interval (1.5% –
3.5%) in 2026, due to the base effects and the expected negative output gap.
The economic analysis of the NBR statement underlined the mixed evolutions of the components of aggregate demand at the end of 2024 (as reflected, for instance, by the acceleration of the retail sales and the intensifying contraction of the constructions), and the improvement of the climate on the labour market (including the rebound of the employment intentions at the beginning of 2025).
As regards the financial analysis, NBR pointed out the recent improvement of the risk perception, which contributed to the decline of the financing costs of the Government and the stability of the EUR/RON.
Last, but not least, the monetary analysis of the central bank emphasized the acceleration of the annual pace of the non-government loans at the end of 2024 (8.9% in Dec), determined by the development of the household component.
Among the risk factors for the evolution of inflation in the coming quarters NBR mentioned the fiscal policy stance, the tensions on the labour market, the fluctuations on the international commodities markets, the trade tensions, the geo-political tensions, the pace of the domestic structural reforms, and the monetary policy decisions in USA and Euro Area. Our view: Conditioned on the consolidation of the positive climate on the international markets and on the improvement of the risk perception in Romania (dependent on favourable developments in terms of politics and public finance) NBR may resume the interest rate cut cycle in the second half of 2025, as inflation converges towards the target interval, while the macroeconomic disequilibria adjust | NEUTRAL
