Romanian Monetary Policy Rate to Remain at 6.25%

March 31, 2011

Officials at the National Bank of Romania left their key interest rate 6.25%, extending the period of time at that level to at least twelve months.  From a peak of 10.25%, the rate was cut five times in 2009 by a total of 225 basis points and four more time last year (but not after May) by a further total of 175 basis points.  The interest rate decision had been anticipated.  Officials also reduced reserve requirements on foreign currency-denominated deposits to 20% from 25%, while leaving all other reserve requirements unchanged.  That move was undertaken “in order to continue the gradual alignment to the European Central Bank standards in the field.” 

When officials last cut their main interest rate in May 2010, they were looking at a 12-month CPI inflation rate of 4.2%, a three-year low.  Inflation in February clocked in at 7.6%, up from 7.0% in January.  A statement released today underscores the difficult task of striking a balance between promoting growth, which has been weak, and “preserving the prospects of a sustainable resumption of disinflation” and promises to “vigilantly monitor domestic and global economic developments so as, via an adequate use of its available instruments, to ensure the fulfillment of its objectives of achieving and maintaining price stability as well as financial stability.”  Inflation is blamed mostly on external pressures on food and fuel, but a risk exists of such spilling over into other price-setting patterns.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



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