Romania’s central bank keeps key interest rate at 2.5 pct

Sorin Melenciuc 06/08/2018 | 12:21

The National Bank of Romania (BNR), Romania’s central bank, decided on Monday to maintain the monetary interest rate to its current level of 2.5 percent for the second time in a row, against economists’ expectations.

The Bloomberg consensus was for Romania’s central bank to hike rates from a current level of 2.5 percent, at its meeting on Monday.

On May 7, the central bank raised the monetary interest rate from 2.25 percent to 2.5 percent, the highest level since February 2015, as a consequence of upward revision of the inflation forecast.

“In its meeting of 6 August 2018, the Board of the National Bank of Romania decided: to keep the monetary policy rate at 2.50 percent per annum; to leave unchanged the deposit facility rate at 1.50 percent per annum and the lending facility rate at 3.50 percent per annum; to maintain the existing levels of minimum reserve requirement ratios on both leu and foreign currency-denominated liabilities of credit institutions,” the central bank said in a press release.

Central bank’s decision was expected by some economists.

“We call for an out-of-consensus hold at 2.50%. Reasons for our call for 6 August meeting: already tighter policy stance due to higher ROBOR and stronger RON; likely narrower revision for the output gap and subsequently a shift lower for core inflation outlook; dovish NBR Board likely needs more time to assess mixed-to-weaker high frequency indicators, including soft data; more details needed on upcoming budget revision; no sign of a credit driven assets price bubble,” ING Bank analysts said in a recent report.

Romania’s annual inflation rate soared to 5.4 percent in May and June, the highest rate since June 2013.

The current BNR forecasts, published in May, show inflation hitting 3.6 percent at the end of this year and 3 percent in December 2019.

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