Elsewhere in the region, which was at the forefront of a global tide of policy tightening to curb decades-high inflation, policymakers, wary of an economic slowdown, have already put rates on hold. Romania's central bank said it expects annual inflation to fall to single digits by the third quarter, driven by a government energy support scheme, lower commodity prices and an economic slowdown.
However, the bank said it sees inflation falling "at a visibly slower pace in the second half of 2024 and remaining slightly above the variation band of the target at the end of the projection horizon." The bank, which targets inflation at 1.5%-3.5%, will release new inflation forecasts for this year and next on Feb. 15.
Analysts polled by Reuters had expected the decision and a majority see borrowing costs unchanged throughout 2023.
Romanian policymakers have hiked interest rates 11 times since Oct. 2021 for a total 575 basis points, bringing the benchmark to its highest level in more than a decade. "We think that its tightening cycle is now over," said Capital Economics economist Nicholas Farr in a research note.
"That said, we don't expect the NBR to cut interest rates until 2024, making it one of the last central banks in the region to transition to monetary loosening. We think it will need to keep policy tighter for longer to reduce inflation and inflation expectations sustainably." The Romanian leu was flat against the euro after the decision.
The bank also kept its lending facility rate at 8.00% and its deposit rate at 6%, and made no reference to market liquidity controls, a policy instrument it uses to tighten lending conditions. The bank dropped its commitment for "firm" controls in January, when high government spending and foreign investors' interest in Romanian bonds saw record high surplus liquidity. The bank was likely to actively use liquidity management in the following quarters, depending on the exchange rate and inflation readings, BCR Bank chief economist Ciprian Dascalu said. (Reporting by Luiza Ilie; Editing by Jane Merriman)
