Romania hikes key interest rates by 2%

Bloomberg

Romania raised interest rates less than expected, surprising some investors who have expected the central bank to lift borrowing costs faster to tackle decade-high inflation and catch up with more aggressive rate hikes by its
regional peers.
The central bank raised borrowing costs by 25 basis points to 2%, a move predicted by five out of 11 economists surveyed by Bloomberg. The other six expected a 50 basis-point hike.
While Romania had the highest rates in the 27-member European Union during the summer, it’s now lagging behind other eastern members of the bloc outside the euro area that have pursued more aggressive policy tightening.
The central bank stuck to a reluctance to pursue a quicker pace of rate hikes to avoid smothering country’s post-pandemic economic recovery despite a persistent spike in energy prices that is driving inflation.
“Recent developments in high-frequency indicators point to a standstill in economic activity in the fourth quarter of 2021,” It also cited “the fourth pandemic wave, the energy crisis and supply bottlenecks.”
Consumer prices were 7.8% higher from a year earlier in November. The central bank doesn’t expect inflation to return to its target band until late 2023, with price growth topping 5% at the end of this year.
On the other hand, economic growth is forecast to be among the continent’s quickest, though the new wave of the Covid-19 pandemic and restrictions imposed to try to limit the spread of the virus may quash consumer demand.