Romania surprises with first rate hike in a decade

Bloomberg

Romania unexpectedly raised borrowing costs for the first time in almost a decade as inflation bounces back and its economy expands at one of the continent’s quickest paces.
The central bank lifted its benchmark interest rate to 2 percent from a record-low 1.75 percent on Monday, according to an emailed statement. The move was predicted by five of 15 economists in a Bloomberg survey, while 10 saw no change. Governor Mugur Isarescu will hold a news conference at 3 pm
in Bucharest.
“While the decision comes as a surprise, the central bank is trying to get on the curve very fast,” Ciprian Dascalu, a Bucharestbased economist at ING Bank NV, said by email. “This is positive for the leu
and Romanian debt.”
Romania is following the Czech Republic and the UK in increasing borrowing costs, even as Isarescu warns that raising rates before the European Central Bank risks luring volatile foreign capital and denting financial stability. But the central bank has been left with little choice: inflation accelerated to the most in four years in November, while a
raft of tax cuts and public-
sector pay rises drove economic growth to an annual 8.8 percent in the third quarter.