Page 33 - Economic Outlook Romania 2019

Monetary backdrop & outlook: summing up

• Rates outlook: Distorted by the fiscal dominance

• NBR independence remains crucial for markets

• NBR walking a fine line balancing FX and interest rates

• Fiscally tightened credit conditions: NBR rate at 2.75% by year-end

• Weaker growth, flatter Phillips curve points to less tightening ahead

• EUR/RON outlook: NBR to shift comfort range higher

• Very high FX pass-through: 1ppt depreciation leads to 0.4ppt higher CPI

• Weaker fundamentals, relative overvaluation concerns

• Managed float, but political slippages might lead to RON weakness

• 3-4% RON depreciation is likely due to lower NBR flexibility on interventions

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