Some say there is room for one more cut of the key rate to 1.5% at the end of the year, while some pessimists see the rate reach 2.5%.
Economists expect the central bank to keep the key rate unchanged in the first monetary policy meeting of the year on January 7.
Romania’s economy will continue to grow this year, so the gross domestic product will increase by 4% or even more.
Radu Craciun, the chief economist of BCR, the largest bank in the system, believes Romania’s central bank will have to raise the key rate in the fourth quarter “as inflation will remain probably negative until mid-year because of the VAT cut impact and then come close to 1% at the end of the year.”
Romania’s central bank has kept the key rate unchanged since May 2015, when it last lowered the rate to the all-time low of 1.75% a year along with a reduction of the minimum mandatory reserves in lei by 8%, while foreign currency minimum mandatory reserves stayed at 14%.
(English version by Loredana Fratila-Cristescu)