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Romania’s First Rate Hike in a Decade

Romania’s  First Rate Hike  in a DecadeRomania’s  First Rate Hike  in a Decade

Romania unexpectedly raised borrowing costs for the first time in almost a decade as inflation bounces back and its economy expands at one of the continent’s quickest paces. The central bank lifted its benchmark interest rate to 2% from a record-low 1.75% on Monday, according to an emailed statement. The move was predicted by five of 15 economists in a Bloomberg survey, while 10 saw no change. “We increased the key rate because of inflation and because we want to anchor inflationary expectations from the start,” central bank Governor Mugur Isarescu told a news conference in Bucharest. Romania is following the Czech Republic and the UK in increasing borrowing costs, even as Isarescu warns that raising rates before the European Central Bank risks luring volatile foreign capital and denting financial stability. But the central bank has been left with little choice: inflation accelerated to the most in four years in November, while a raft of tax cuts and public-sector pay increases drove economic growth to an annual 8.8% in the third quarter.

 

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