(Bloomberg) -- Romania’s central bank is poised to pause monetary policy easing as the rate-setting panel meets for the last time in its current line-up and price pressures persist.
The National Bank of Romania will leave the benchmark rate at 6.5% after cuts at the last two meetings, according to 12 of 20 economists in a Bloomberg survey. Eight analysts forecast another-quarter point reduction on Friday.
While inflation slowed again in August after a temporary spike the central bank only expects price growth to re-enter its target band of between 1.5% to 3.5% next year. The outlook for 2025 is clouded, though, by the need to reduce a budget deficit that’s expected to reach 7% of economic output this year ahead of elections and may lead to tax increases.
“We expect the central bank to stay on hold due to annual inflation remaining high, very lax fiscal policy and increasing fiscal worries,” said Anca Maria Negrescu, a Bucharest-based economist at UniCredit Bank.
During parliamentary hearings before securing another five-year term this week, Governor Mugur Isarescu vowed to continue fighting one of the highest inflation rates in the European Union while trying to avoid triggering a recession. Four new members will join the team of the world’s longest-serving central bank chief from next week.
Economic growth is expected to slow to less than 2% this year, according to some analysts, as industry remains significantly impacted by the sluggish demand in western European economies.
“The disappointing economic growth recorded in the first half indicates that a key rate cut would be welcomed, but the central bank must find the right balance between supporting growth and avoiding capital outflows and depreciation pressure on the leu,” said Unicredit’s Negrescu.
--With assistance from Barbara Sladkowska.
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