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Romania Monetary Policy February 2019

Romania: Central Bank holds rates unchanged at its February meeting

At its monetary policy meeting held on 7 February, the National Bank of Romania (NBR) kept the policy rate unchanged at 2.50%. The Bank also left the deposit facility rate unchanged at 1.50%, the lending facility (Lombard) rate at 3.50% and the reserve requirement on both leu- and foreign-currency denominated liabilities unaltered.

The Bank’s decision was underpinned by softening inflation and some cooling in economic activity. Easing price pressures were reflected by December’s data on both headline and core inflation. At the same time, slowing growth in industrial production in October-November and announcements by several major financial institutions that they will likely postpone their investment plans due to the recently-introduced tax on banks’ assets point to some deceleration in growth. Going ahead, the Bank expects inflation to decline further in the next three quarters, before approaching the upper bound of the Bank’s target range of 1.5%–3.5% in 2020.

Persistent albeit softening inflationary pressures and the ECB’s gradual monetary policy normalization should prompt the Bank to hike interest rates this year, although the new tax on banks’ financial assets could interfere with the Bank’s decisions.

The next monetary-policy meeting is scheduled for 2 April.

Romania Interest Rate Forecast

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