National Bank of Romania Implements Another Rate Reduction

February 2, 2012

Romanian monetary authorities implemented a twelfth interest rate cut as a majority of forecasters expected, reducing the main policy rate by 25 basis points to a cyclical low for the move of 5.5%.  The prior two 25-bp cuts were announced in November and January.  There were also five reductions totaling 225 basis points in 2009 and four moves in 2010 totaling 175 bps.  Reserve requirements were not changed today.  A statement from officials speaks of disinflation and a need to manage liquidity amid continuing euro debt risk uncertainties.  Consumer prices in December were 3.14% greater than a year earlier, down from a 7.96% rise in the prior year to December 2010.  The direct impact of higher value added tax is no longer embodied in on-year comparisons, and second-order inflation was prevented.  Romania still has one of Europe’s highest monetary policy rates, and economic growth has been soft.  A quarterly inflation report from the central bank will be published in five days.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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