National Bank of Romania Eases Monetary Policy in Three Ways

November 4, 2014

A quarterly review of the outlook for inflation in which the forecast was cut sharply to 1.5% at end-2014 and 2.2% at end-2015, provided an opportunity for monetary officials to ease policy further.  In explaining the forecast change, a released statement calls attention to “the persistence of the negative output gap, the consolidation of inflation expectations at lower levels, as well as from the influence of subdued inflation, and the weak economic recovery in the euro area and other European countries.”  For a fifth time this year following reductions in January, February, August and September, Romania’s main monetary policy rate is being cut by 25 basis points.  The new 2.75% level constitutes a record low and lies 750 basis points below the end-2008 high of 10.25%.  Central bank officials also cut the overnight lending rate by 50 bps to 5.25% while leaving the deposit rate at 0.25%.  Thirdly, the reserve requirement on foreign currency deposits was reduced to 14% from 16%.

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



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