Romania’s central bank raises key rate to 3-year high of 2.5 pct

Sorin Melenciuc | 07/05/2018 | 13:20

The National Bank of Romania (BNR), Romania’s central bank, raised on Monday the monetary interest rate from 2.25 percent to  2.5 percent, the highest level since February 2015, in line with economists’ expectations, who see the decision as a consequence of upward revision of the inflation forecast.

It is the third rate hike this year and part of central bank’s inflation targeting strategy.

“In its meeting of 7 May 2018, the Board of the National Bank of Romania decided the following: to increase the monetary policy rate to 2.50 percent per annum from 2.25 percent per annum as of 8 May 2018; to raise the deposit facility rate to 1.50 percent per annum from 1.25 percent per annum and the lending facility rate to 3.50 percent per annum from 3.25 percent per annum as of 8 May 2018,” the central bank said in a press release.

Central bank’s decision was broadly expected by the economists.

“We expect the NBR to hike by 25 bp to 2.50 percent at the next meeting on 7 May, as the response in warranted by a likely upward revision of the inflation forecast and continue with pursuing a firm liquidity management. Another hike by the end of the year remains data dependent,” ING analysts said in a recent report.

Romania’s annual inflation rate soared to 5 percent in March, the highest rate since June 2013.

The current BNR forecasts, published in February, show inflation hitting 3.5 percent at the end of this year and 3.1 percent in December 2019.

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