The Bank was expected to refrain from intervening at this meeting and we now believe it will continue to do so until its April 2024 meeting. We expanded our projection of the first cut at a meeting due to multiple factors:
- a slight derailment of the disinflation path in August of this year
- Higher oil prices in the second half of 2023.
- the possible upward pressures derived from a higher tax burden in 2024
- global story, with markets apparently starting to accept the story that the US Federal Reserve and the European Central Bank are on the rise for longer.
That said, we also believe that pressures on growth will remain visible in the future, as Romania’s main trade patterns will continue to perform below expectations and the lagged effects of high interest rates will put a stronger brake on activity.
Therefore, we still forecast a total of 150 basis points of cuts by the end of 2024.