National Bank of Romania

March 31, 2015

Romania’s central bank Board today cut its policy interest rate to 2.0% from 2.25%.  This was the third straight monthly reduction and the sixth such cut in the last eight months.  The rate at end-2008 was 10.25% but cut by 400 basis points in 2009-10, 100 bps in 2011-12, 125 bps in 2013, 125 bps in 2014 and 75 bps so far this year.  In a statement released today, officials explain that the driving force behind the continuing cuts is sub-target inflation (0.4% on year versus a 1.5-3.5% objective) and a continuing negative output gap, meaning underutilized productive resources.  The Board also reduced its standing lending facility rate to 3.75% from 4.25% but left is standing deposit facility rate at 0.25%, so these now become 175 bps above and 175 bps below the policy interest rate.  Reserve requirements were not changed.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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