National Bank of Romania Interest Stays Unchanged as Expected

March 28, 2013

Romania’s benchmark interest rate has been at 5.25% since four 25-basis point cuts spaced tightly between November 2011 and March 2012.  Officials would like to ease further but can’t because of above-target CPI inflation.  The target is 1.5 – 3.5%, whereas consumer prices rose by 5.65% in the twelve months to February.  Officials are counting on a sizable output gap to reduce inflation toward the target later this year and are hopeful that such a development will also curb expected inflation.  A statement on the NBR’s web site sums up the present stance this way: “The monetary policy remained prudent, seeking to firmly anchor inflation expectations amid the transitory inflation bout and the heightened capital flow volatility, triggered by resurgent eurozone tensions stymieing investors’ risk appetite.” 

In the Great Recession, the Romanian central bank interest rate was cut from a high of 10.25% by 225 basis points in 2009 and a further 175 bps during the first five months of 2010.

Copyright 20113, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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