RO central bank maintains monetary policy rate, in line with expectations

Romania’s National Bank (BNR) maintained the monetary policy interest rate at 2.5%, in the monetary board of October 3, in line with bank analysts’ expectations.

The interest rates for overnight deposit and lending facilities were also maintained at 1.5% and 3.5%, and the minimum required reserve ratios were not changed.

The central bank said it would maintain strict control over money market liquidity. The central bank also said its decisions aimed “to ensure and preserve price stability over the medium term in a manner conducive to achieving sustainable economic growth and amid safeguarding financial stability.”

Notably the monetary policy decision came at a moment when the economy is decelerating and the external deficit is widening. Romania’s 12-month current account deficit hit 4.9% of GDP at end-July.

The fiscal balance also rises concerns as it reached 2.1% of GDP in January-August contributing to the twin deficit problem. However, the price stability has not deteriorated recently as a result of such tensions accumulating.

The annual consumer price inflation rate went up to 4.1% in July from 3.8% in June, whereas in August it declined to 3.9%, in line with the forecast, remaining above the variation band of the target, the central bank’s release reminded.

The monetary authority said the headline inflation would remain slightly below the trajectory inked in the latest Inflation Report issued in August, by the end of the year. Under the August Inflation Report, the central bank projected 4.2% annual inflation at the end of this year, and 3.4% at the end of 2020.

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