Banks’ analysts expect the National Bank of Romania (BNR) to keep the refinancing rate at 7% on May 10 and most likely for the entire year, making use of liquidity management to pursue the monetary policy target of halving the inflation rate from over 14% y/y in March to 7% y/y at the end of this year.

The BNR is more likely to respond to the currency strengthening by favouring more liquidity in the money market. It is unlikely that the BNR will announce the end of the monetary tightening cycle, given the high uncertainty prevailing.

“Nothing will change in the monetary policy. Inflation is on a downward path and is even at the lowest levels in the region," argued Adrian Codirlasu, vice president of CFA Association Romania. He said he expected the inflation to fall by about two percentage points in April.

Significant base effects helped disinflation in April, as consumer prices surged by 3.7% in April 2023. April inflation will be released on May 12.

"We see the key stable rate at 7.0% over the course of 2023. We expect the BNR to keep the monetary policy rate unchanged at the May 10 meeting, in line with the broad consensus," said BCR chief economist Ciprian Dascalu.

He noted that inflation eased significantly to 14.5% y/y in March from 15.5% y/y in February, although it stayed slightly above Erste Bank's forecast and Bloomberg consensus, both of 14.4% y/y. 

"Disinflation was helped by the ample statistically basic effect, which should play an even more important role in April when we expect inflation to fall to 11.6% y/y. the CORE inflation already decreased to 9.0% y/y in March, from 9.2% y/y previously, confirming that the [headline] inflation lags behind," Dascalu said.