National Bank of Romania Review: treading through uncertain waters

The NBR’s decision to hold fire once again came on the back of growing uncertainties regarding the inflation outlook, where upside pressures in the near-to-medium term persist. Domestically, they stem from the labour market, the fiscal impulse, and the negative impact of this year’s drought.

On top of that, geopolitical risks have magnified since the last decision. In the US, the Republican clean sweep complicates the policy outlook, amplifying the upward risks for inflation through trade protectionism. On the other hand, there are downward risks for growth due to its impact on European industrial output, hence quite a foggy macro picture for the NBR to navigate through.

What’s more, our views for next year revolve now around a stronger dollar, surging US yields, and a smaller need for Fed cuts given the activity boost of potentially lower taxes. We also have a still-weak outlook for the European economy, which is exposed to either tariffs and/or various bilateral concessions. We think that risks associated with this scenario also rank high on the NBR’s radar.

All of these aspects reinforce our long-held view that the Bank will have to fine-tune a very cautious easing cycle in 2025 through a highly challenging macro environment. Policymakers have revised their inflation path higher, and we will get more insights on that with the release of the November inflation report on 11 November.