Key Romanian Interest Rate to Stay at 6.25%

August 4, 2010

For a second straight meeting, officials at the National Bank of Romania kept the monetary policy rate at 6.25%.  Cuts in January, February, March and May had reduced the key interest rate by 175 basis points on top of 225 basis points of reduction implemented in five steps during 2009.  Romania had been comparatively late to get falling interest rates.  Until early June, only one 25-bp cut had been made.   The sovereign debt crisis has put many East European economies in a more cautious frame of mind.  Romanian monetary officials additionally have to worry about the impact on consumer price inflation and the country’s currency of a five-percentage point value added tax increase.  Although economic growth is not as sound as they’d like, policy has moved into a more careful mode.  The IMF has lent moral supporting, opining that the VAT increase need not necessitate an automatic interest rate increase.

At a subsequent press conference, officials released a statement of explanation for today’s decision that can be read by clicking here.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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