National Bank of Romania Retains 10.25% Key Rate

January 6, 2009

A statement released by monetary officials justifies keeping Romania’s central bank rate at a cyclically high 10.25% but hints that a cut may occur as soon as the next scheduled meeting on February 4, when new quarterly inflation forecasts will be released. The benchmark rate was raised 325 basis points from 7.0% in seven steps between October 2007 and June 2008 and has been held at 10.25% since the middle of last year. CPI inflation, which fell by a fourth from 9% in July to 6.75% as of November, is projected to continue dropping amid a worsening financing and real economic environment. But officials are watching their currency warily, as such is 13% softer against the euro than in October, and they want to see more consolidation of the fiscal and external deficits before making an initial reduction in the central bank rate or reserve requirements. In the meantime, open-market operations will remain the focus of efforts to ensure adequate money market liquidity.


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