Romania Holds EU's Highest Rates as Economy Trumps Inflation
Comment of the Day

May 12 2021

Commentary by Eoin Treacy

Romania Holds EU's Highest Rates as Economy Trumps Inflation

This article from Bloomberg may be of interest to subscribers. Here is a section:

The central bank is switching to a “wait-and-see mode,” Commerzbank analyst Alexandra Bechtel said. “The rate-cut cycle is complete.”

The jump in inflation has brought to an end a run of four reductions in the benchmark during the pandemic.

That easing helped fuel an economic revival: Economic growth outshone the rest of the EU in the last quarter of 2020. The expansion has added to upward price pressures that are mainly being driven by higher global energy costs and the liberalization of the domestic electricity market.

With borrowing costs stable, central bank Governor Mugur Isarescu has said he may make the national currency’s exchange rate more flexible to keep inflation in check without choking the nascent economic recovery.

Eoin Treacy's view

MSCI’s Eastern Europe ex-Russia index was last updated in 2016. Generally speaking, when esoteric benchmarks are abandoned, it is because investment demand has evaporated. The ETF issuance business is driven by fashion and momentum. The incremental cost of creating new funds is low and success is measured by the number of assets they attract. When a sector falls out of favour ways to invest in it disappear.

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