Last week, the National Bank of Romania (NBR) held its policy rate unchanged at 2.5%, even though CPI inflation had risen to 3.8% y/y in February and thus climbed above the upper bound of the NBR’s 2.5% ± 1pp target range. Today it was published that inflation rose further to 4% y/y in March. The rate decision by the NBR Board was unanimous, but some Board members raised concerns about a number of upside risks to future inflation. These include that core inflation rose to 2.7% y/y in February from 2.4% at end-2018 and the further tightening of the labor market. The unemployment rate (national definition) remained at the historical low of 3.3% in January while the growth of wages (net average nominal earnings) re-accelerated to +18% y/y in the first two months of 2019 from +13% in Q4 2018. Moreover, the RON, which was remarkably stable in 2018, has weakened this year (-2% vs. the EUR YTD). We expect the NBR to continue to try to curtail macroeconomic imbalances by upholding firm control over money market liquidity, but this is likely to be accompanied by an interest rate hike later this year.