BUCHAREST: Romania's central bank delivered a quarter point hike to its benchmark interest rate to 2.25 percent on Wednesday, as expected, seeking to curb rising inflation.
The bank began increasing borrowing costs for the first time in a decade last month and analysts, who had predicted Wednesday's rise, estimate the benchmark will stand between 2.5 and 3.5 percent at the year end.
Inflation rose to 3.3 percent on the year in December, sharply above the central bank's 2.7 percent forecast, fuelled by a jump in domestic consumption.
The bank has said it expects inflation to exceed its 1.5 to 3.5 percent target range in the first part of 2018, as the statistical base effect of a 2017 value-added tax cut fades, before falling back in target at the end of the year.
New inflation forecasts will be released in mid-February.
"We think that inflation climbed above the upper-bound of the central bank's target range in January, and the headline rate has further to rise over the course of this year," Capital Economics said in a research note.
"As a result, far more tightening lies in store."
Romania is the second of the EU's central and eastern nations to start tightening from record low levels, after Czech policymakers.
The Romanian leu was trading 0.1 percent softer against the euro on the day at 4.6470 by 1150 GMT, unchanged from levels before the rate decision.
Wednesday's move would also boost the central bank's deposit and lending facility rates to 1.25 percent and 3.25 percent, from 1.00 and 3.00 percent respectively.
Governor Mugur Isarescu is expected to provide details on the decision from 1300 GMT.
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