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Romania Monetary Policy April 2019

Romania: Central Bank stays put in April

At its monetary policy meeting held on 2 April, 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 to hold came amid a surprise rise in inflationary pressures. After remaining stable at 3.2% in January, inflation jumped to 3.8% in February, overshooting the NBR’s 1.5%–3.5% target range and its own forecast. Similarly, core inflation accelerated to 2.7% in February (January: 2.5%), due to both demand-pull and wage-push pressures. Against this backdrop, the Bank noted that inflation will remain above its target band over the short-term and will follow a higher path than that projected in its February meeting forecasts. It also highlighted the upside risks to its inflation outlook, deriving mainly from the country’s rising fiscal and current account deficits, and a tightening labor market.

Given the presence of inflationary risks, the Bank signaled tighter policy ahead. It was not specified, however, whether that would come in the form of stricter liquidity management and/or further rate hikes.

The next monetary policy meeting is scheduled for 13 May.

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