Romania kept borrowing costs steady for a fifth consecutive meeting as lingering inflation and fiscal risks keep the prospect of potential easing on hold.
(Bloomberg) — Romania kept borrowing costs steady for a fifth consecutive meeting as lingering inflation and fiscal risks keep the prospect of potential easing on hold.
The central bank in Bucharest left the benchmark interest rate at 7% on Monday, matching the estimates of all economists in a Bloomberg survey. Policymakers also approved an updated inflation forecast, which will be presented Wednesday. The current estimate sees inflation declining to about 7% by the end of the year from 10.25% in June.
“The current inflation outlook is marked by heightened uncertainties, mainly from a temporary cap on basic food markups but especially from the fiscal measures that are expected to be implemented with a view to boosting public revenues,” the National Bank of Romania said in a statement.
Inflation is expected to come close to the bank’s target at the end of a two-year time frame, the bank said.
While other central banks in the region have begun discussing or moving toward monetary policy easing, Romanian policymakers are trying to strike a balance between an economic slowdown and the risks posed by potential tax increases.
The government in Bucharest is struggling to address a worsening budget deficit that risks triggering the loss of much-needed European funds. Prime Minister Marcel Ciolacu said last week that a deficit target was at risk as the coalition struggles to agree on spending cuts and revenue increases.
–With assistance from Joel Rinneby.
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