National Bank of Romania Becomes First Central Bank to Ease in 2014

January 8, 2014

Romania’s base rate has been cut to 3.75% from 4.0% and was accompanied by a statement that projects falling inflation and expresses concern about the negative growth of bank lending to the private sector. 

The analysis of macroeconomic indicators points to further disinflation, as a result of the decline in volatile prices, particularly food prices, as well as of the persistent negative output gap and the significant improvement in inflation expectations. 

The annual rate of change of total loans (in domestic and foreign currency) to the private sector remained in negative territory, despite a relatively improved performance of leu-denominated loans. The decline in interest rates on new loans to companies and households, the successive monetary policy rate cuts and the improved money market liquidity conditions contribute to the positive dynamics of loans in domestic currency.

The base rate is at a record low after this latest reduction.  The second half of 2013 saw four cuts totaling 125 basis points.  From a 2008 peak of 10.25%, the key Romanian central bank rate was slashed by 225 bps in 2009, 175 bps in 2010, 25 bps in November 2011 and 75 bps during 2012. 

Today’s rate cut was complemented with a reduction of central bank reserve requirements.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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