Romania’s central bank keeps monetary policy rate at 2.5%

The monetary board of Romania’s central bank BNR decided in its meeting of May 15 to keep the monetary policy rate at 2.5% per year, the interest rate corridor at +/-1pp and the current levels of the minimum reserve requirement ratios on both local- and foreign currency-denominated liabilities of credit institutions.

The decision is in line with anticipations, although some saw last-minute robust Q1 GDP growth (5% year-on-year, significantly above consensus forecast) as an argument for a rate cut move to tackle the inflationary pressures.

“Speaking of the inflation rate, with today’s GDP figures in hands, I believe there is a strong case for BNR to raise its monetary policy interest rate, perhaps even today,” Horia Braun, chief economist at lender BCR said earlier in the day to Ziarul Financiar.

In turn, the central bank announced “tightening control over money market liquidity”, a strategy also anticipated by banks’ analysts and expected to push up the short-term interest rates with the side effect of lifting households’ cost of borrowing.

The central bank also said that it examined and approved the May 2019 Inflation Report. The new scenario indicates the outlook for the annual inflation rate to remain above the variation band of the target during the next three quarters and thereafter return to and stay in the upper half of the band until the end of the forecast horizon amid the upward revision of its projected path, especially over the short time horizon.

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