Romania cuts rates, Czechs on hold until inflation falls

The National Bank of Romania (NBR) cut interest rates today amid concerns that the economy is on the cusp of a new recession. We expect one further cut this year, but the threat of financial contagion from the euro-crisis is a formidable barrier to more aggressive easing. By contrast, the Czech Republic is already in recession, but with rates at a record low, policymakers have little room for manoeuvre. We think one rate cut is probable later this year, but not until Q3, when inflation should start to fall back.