Romania: Central Bank cuts policy rate to an all-time low
April 1, 2015
At its 31 March meeting, the National Bank of Romania (NBR) decided to reduce the monetary policy rate from 2.25% to 2.00%, which marks an all-time low. The decision came as a surprise to the markets, which had expected the rate to remain unchanged at 2.25%. In addition, the Board decided to narrow the symmetrical corridor of interest rates on the NBR’s standing facilities around the policy rate to plus/minus 1.75% from plus/minus 2.00%. As a result, starting 1 April, the interest rate on the NBR’s lending facility (Lombard) was lowered to 3.75% from 4.25%, while the deposit facility rate was kept unchanged at 0.25%. The Bank decided to leave unchanged the current levels of minimum reserve requirements ratios on both leu- and foreign currency-denominated liabilities of credit institutions.
In its accompanying statement, the Central Bank pointed out that the economy gained momentum in the fourth quarter of last year on the back of rising final consumption and strong fixed investment, which contributed positively to GDP growth for the first time in two years. The Board commented that monthly economic indicators suggest that the positive trend has continued during 2015 thus far.
Regarding price developments, annual inflation in February remained unchanged at January’s 0.4%.
Against this backdrop, the Committee commented that, “the Board of the National Bank of Romania decided to lower the monetary policy rate to 2.00 percent per annum from 2.25 percent starting 1 April 2015 and to continue to pursue adequate liquidity management in the banking system.”
Author: Cecilia Simkievich, Economist