(Bloomberg) -- Romania raised borrowing costs for the fifth time in a row as it races to tame the fastest inflation in 14 years, even as risks tied to the war neighboring Ukraine continue to pile pressure on the economy.
The central bank raised the benchmark interest rate by half a point to 3% at its meeting on Tuesday, matching the estimates of nine out of 12 economists surveyed by Bloomberg. The other three predicted a smaller hike to 2.75% at the session, which is the first since Russia launched its war on Ukraine.
Concern over the war as well as higher energy prices has prompted rate-setters in Bucharest to take a more cautious approach than regional peers. Despite increasing the pace of rate hikes in February, Romania is still lagging behind regional peers Poland, Hungary and the Czech Republic, which have pursued bolder moves in the past months.
“The annual inflation rate is expected to rise somewhat more steeply in the coming months than anticipated in February, under the impact of supply-side shocks,” the bank said in the statement.
The central bank currently sees inflation accelerating to 9.6% at year-end, from 8.5% in January, with the potential to spike to double-digit figures. The rate is not expected to return to the target band until late 2023.
The leu was little changed to the euro, remaining the region's most stable currency since the war in Ukraine started.
Romania's economy is forecast to slow significantly this year because of geopolitical turmoil and the spike in utility bills that directly impact companies and citizens, while some analysts don't rule out a technical recession in the first part of the year.
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