The present study presents, in the first part, three possible inflationary scenarios in the Romanian economy; in the second part, the implications of these scenarios on the banking sector are analyzed; finally, the third part suggests some actions for banks and policy makers.

Romania’s economic policy has undergone a significant change of direction lately. After several years of fiscal consolidation and structural reforms, closely monitored by the IMF and the European Commission, the fiscal position of the country seem to change. Relaxation measures were implemented in 2015, as VAT cuts and wage increases. Some of these have already been implemented last year, while a new set of measures enter into force in 20...