National Bank of Romania
January 7, 2016
Romania’s central bank Board left the monetary policy interest rate at 1.75%, a record low and the level since a cut last May. The reserve requirement was lowered by two percentage points to 12.0%, and a released statement
- Observed that inflation remains negative versus a 1.5-3.5% target.
- Projected that “the annual inflation rate will return to positive territory after the effects of the VAT rate cut in June 2015 have faded out, amid an easing of the fiscal policy stance and higher unit labor costs.
- Implied that “the persistence of risks and uncertainties associated with certain developments in the external environment as well as on the domestic front” creates scope for growth and price trends to deviate from expectations.
- Justifies the reserve requirement cut as follows: “Against the background of slower forex loan dynamics and in order to continue the harmonisation of the reserve requirements mechanism with the standards and practices of the European Central Bank and the major central banks across the European Union, the NBR Board decided to cut the minimum reserve requirements ratio on foreign exchange-denominated liabilities of credit institutions to 12 percent from 14 percent starting with the 24 January-23 February 2016 maintenance period. The minimum reserve requirements ratio on their leu-denominated liabilities remains unchanged at 8 percent.”
The monetary policy rate was cut six times by 25 basis points each between September 2014 and May 2015.
Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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