National Bank of Romania Keeps Status Quo

May 6, 2014

Romania’s monetary policy rate has been at 3.5% since February.  From a peak of 10.25% at end-2008 it fell to 3.5% in increments of 225 basis points during 2009, 175 bps in 2010, 25 bps in 2011, 75 bps in 2012 and 175 bps since mid-2013 including cuts of 25 bps in the first two months of 2014.  From a macroeconomic standpoint, more easing could be done because of a “continuation of disinflation in line with the forecasted path,” seemingly well-anchored inflation expectations, a “comfortable” situation regarding the current account and international reserves, and the repayment of a substantial part of Romania’s foreign debt.  GDP is expanding moderately, but downside risks persist associated partly with “the variability of investors’ risk appetite over the short and medium term in relation to emerging economies as a whole amid the recent geopolitical and regional tensions.”  Because of such things as the turmoil in the Ukraine, central bank officials prefer to do any further easing through channels other than the policy interest rate, but they chose at this month’s meeting to leave their reserve requirements unchanged as well.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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