Having lowered interest rates earlier today, Romania’s National Bank Governor, Mugur Isarescu, gave a strong hint that further cuts are likely in the months ahead. This dovish stance has been supported by weaker-than-expected inflation as well as sluggish domestic demand. Romania’s large external financing needs and heavy FX debt burden will continue to pose a risk. But for now, we have pencilled in two 25bp interest rate cuts next year, whereas we had previously expected rates to be left unchanged.
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