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Romanian leu outlook hinges on politics as NBR holds 6.50%

Societe Generale said headline CPI fell from 10.9% year over year in May to 6.2% in August due mainly to base effects, but political deadlock and RON weakness led it to expect no rate change.

Reported · Written up by our desk · EM Currencies

Societe Generale expects Romania’s central bank, the NBR, to keep the policy rate unchanged at 6.50% as political deadlock in Bucharest and Romanian leu weakness offset a sharp drop in inflation, according to an FXStreet analysis.

The bank pointed to headline CPI declining from a peak of 10.85% year over year in May to 6.17% in August, saying the move largely reflects base effects.

Societe Generale also highlighted government formation uncertainty after President Dan nominated diplomat Luca Niculescu as prime minister following a previous pick that lost a confidence vote, noting Niculescu has until the 15th to form a cabinet and win parliamentary approval.

The bank warned that if turmoil persists, it could jeopardize Romania’s Investment Grade rating, it said.

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