By noon today, a select group of 9 members of the Board of Directors of the National Bank will go up to the Council Hall in the Palace of the BNR to decide whether to lower or maintain the key interest rate. For the most part, the decision has already been made, but today their decision is put to a vote. Shortly before that, the nine participated in a monetary policy meeting where they analyzed economic development scenarios with members of the Monetary Policy Committee (CPM) and several other BNR directors. Most likely, interest will be kept at the level of 7%.

The governor has repeatedly signaled that negotiations on lowering interest rates can begin only after inflation falls below the key rate (7%), that is, sometime in the second quarter of the year.

That’s right, in November. Despite inflation falling below the key rate in November, economists say we will see another inflation boost in the first quarter as a result of the government’s fiscal measures.

A post-conference press release may provide some guidance on the timing of the first rate cut. “We maintain our estimate of the first rate cut at the May NBR CA meeting and expect the key rate to reach 5.75% at the end of the year (compared to 7.00% now),” BCR said in a note sent to investors.

Dorina Antokhi, who heads the Monetary Policy Department, presented several documents to the 9 members of the BNR State Council. Documents in which the progress of the economy was described in numbers from a macro- and microeconomic point of view. The most important document, however, is the one in which the nine members of the BNR Board of Directors are presented with scenarios for the monetary policy decision they are going to make.

There are usually two or three scenarios, each with their own advantages and disadvantages. What will be the consequences of keeping the key rate on hold or what will happen if the decision is made to raise the key rate by 25 basis points (or lower it). 9 listen to the department head’s explanation and take notes. Then they sit and analyze.

The monetary policy committee consists of 10 members and is headed by the governor of the BNR. Meeting of the Board of Directors chaired by Isarescu. They discuss the tests that 9 have already read. Sometimes Iserescu rarely expresses his point of view at the beginning of discussions, preferring to speak mostly at the end of discussions. Each member of the Central Committee motivates his version of one of the scenario options proposed by the CFM. Finally, it’s time to vote.

According to signal estimates, the GDP of the eurozone in 2023 grew by only 0.5%. “The poor performance is due to the development of the German economy and the flu-like state of its industry,” said the BRD report consulted by HotNews.

The German business model, based on cheap energy from Russia and intensive trade with China, has been changed by recent geopolitical events. At the same time, contrary to pessimistic forecasts, the US economy grew by 2.5% in 2023,” the document also states.

Although Romania’s growth is still stable compared to many advanced economies, growth is noticeably losing momentum amid reduced private spending, subdued housing market activity and falling external demand.

“Construction is moving forward thanks to EU-funded infrastructure investment in major energy efficiency and transport projects. Growth in private spending slowed amid a shift in consumer behavior toward inflation and rising borrowing costs

Risks to the 2025 projections lie in the pace of fiscal consolidation after this year’s elections. Inflation may increase in the first quarter (up to +0.8 pp), mainly under the influence of the increase and introduction of indirect taxes and fees. In particular, an increase in excise taxes on tobacco and fuel, the introduction of an excise tax on sweet drinks, as well as an increase in the VAT rate on some sweet products or on a number of entertainment and sports events. From the second quarter (2024), inflation will return to a downward trajectory, but probably less quickly. Of course, it may even rise temporarily in certain months due to base effects,” BRD economists concluded in their report on Monday evening.