Romania: Central Bank leaves policy rate unchanged in first meeting of the year
January 7, 2016
In the first monetary policy meeting of this year, which took place on 7 January, the National Bank of Romania (NBR) met market expectations in deciding to keep the monetary policy rate unchanged at 1.75% where it has been resting since May 2015. In addition, the Bank did not change the symmetrical corridor of interest rates on the NBR’s standing facilities around the policy rate and kept it at plus/minus 1.50%. As a result, the interest rate on the NBR’s lending facility (Lombard) remains at 3.25% and the deposit facility rate remains at 0.25%. In addition, the Bank decided to maintain the minimum reserve requirement ratio on leu-denominated liabilities of credit institutions at 8.00%. By contrast, the Bank cut the reserve requirement on foreign-currency-denominated liabilities from 14.00% to 12.00%.
The Central Bank stated that consumer prices dropped 1.1% in annual terms in November 2015 and noted that it expects inflation to remain in negative territory in the months ahead due to the cut in the Value-Added Tax that took effect on 1 January. Regarding domestic economic growth, the Bank pointed out that GDP expanded rapidly in the third quarter of 2015 as it was boosted by strong private consumption, which had benefited from higher nominal incomes, lower taxation and stronger sentiment. According to the Central Bank, uncertainties for Romania’s economy come from financial market volatility and fragile global growth externally and internally from a notable increase in public spending at the end of 2015 as well as the projected widening of Romania’s fiscal deficit in the coming years.