Romania's central bank maintains refinancing rate

08 July 2021

The National Bank of Romania (BNR), in its July 7 monetary board meeting, maintained the monetary policy rate at 1.25%, in line with the expectations. The measure follows somewhat mixed conclusions reached by the monetary board, a combination of rather positive developments - threatened by a broad array of risks.

After the monetary board meeting, BNR governor Mugur Isarescu said that the central bank is not worried about inflation, but it remains on stand-by ready to intervene and sterilise the excess liquidity.

"Our short-term forecast is not yet alarming," he said, adding that the central bank is prepared to intervene when needed, Profit.ro reported.

"We can only watch very carefully and stand with our weapons at our feet. The impact of the developments in the US is not so direct, we look more at the EU, at the euro area," he explained, addressing possible questions prompted by the rising inflationary risks in the United States.

BNR said in its monetary board release that it expects the economic growth to continue in Q2, albeit at a lower quarterly pace and to reach a double-digit annual advance on base effects.

The array of risks ranges from health (new chain of coronavirus, low vaccination rate) and possible constraints associated with the Government's behaviour (2021 budget revision, fiscal consolidation plan) and successful local implementation of the European Union's Next Generation Plan.

Romanian analysts expect Romania's National Bank (BNR) to increase the refinancing interest rates possibly late this year due to escalating inflation.

"As economic growth consolidates and pressures begin to emerge, we will probably see a gradual tightening of monetary policy, initially through stronger liquidity control (in the second half of this year) and subsequently by interest increases. We maintain our estimate for a key interest rate unchanged at 1.25% this year and a relatively modest increase to 1.75% in 2022," said Valentin Tataru, the chief economist of ING Romania, a couple of weeks before the latest monetary board meeting on July 7.

andrei@romania-insider.com

(Photo source: Inquam Photos/George Calin)

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Romania's central bank maintains refinancing rate

08 July 2021

The National Bank of Romania (BNR), in its July 7 monetary board meeting, maintained the monetary policy rate at 1.25%, in line with the expectations. The measure follows somewhat mixed conclusions reached by the monetary board, a combination of rather positive developments - threatened by a broad array of risks.

After the monetary board meeting, BNR governor Mugur Isarescu said that the central bank is not worried about inflation, but it remains on stand-by ready to intervene and sterilise the excess liquidity.

"Our short-term forecast is not yet alarming," he said, adding that the central bank is prepared to intervene when needed, Profit.ro reported.

"We can only watch very carefully and stand with our weapons at our feet. The impact of the developments in the US is not so direct, we look more at the EU, at the euro area," he explained, addressing possible questions prompted by the rising inflationary risks in the United States.

BNR said in its monetary board release that it expects the economic growth to continue in Q2, albeit at a lower quarterly pace and to reach a double-digit annual advance on base effects.

The array of risks ranges from health (new chain of coronavirus, low vaccination rate) and possible constraints associated with the Government's behaviour (2021 budget revision, fiscal consolidation plan) and successful local implementation of the European Union's Next Generation Plan.

Romanian analysts expect Romania's National Bank (BNR) to increase the refinancing interest rates possibly late this year due to escalating inflation.

"As economic growth consolidates and pressures begin to emerge, we will probably see a gradual tightening of monetary policy, initially through stronger liquidity control (in the second half of this year) and subsequently by interest increases. We maintain our estimate for a key interest rate unchanged at 1.25% this year and a relatively modest increase to 1.75% in 2022," said Valentin Tataru, the chief economist of ING Romania, a couple of weeks before the latest monetary board meeting on July 7.

andrei@romania-insider.com

(Photo source: Inquam Photos/George Calin)

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