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Romania Monetary Policy October 2019

Romania: NBR stands pat in October

On 3 October, the National Bank of Romania (NBR) kept the policy rate unchanged at 2.50%, while also leaving the deposit facility rate at 1.50%, the lending facility (Lombard) rate at 3.50% and maintaining the reserve requirements on both leu- and foreign currency-denominated liabilities. The decision was in line with analysts’ expectations.

The Bank’s decision to leave monetary parameters unchanged reflected the need to balance above-target inflation with a widening current account deficit. On the one hand, although inflation eased to 3.9% in August (July: 4.1%), in line with expectations, it remained above the 1.5%–3.5% target band. On the other hand, a worsening current account deficit prompted the Bank to stay put, as expected capital inflows, following the looser monetary stance in the ECB, are projected to strengthen the leu, which will thus likely bruise exports in the process.

Looking ahead, the Bank expects inflation to remain above the target band for the remainder of the year, before settling down within the target band in the first half of 2020. That said, risks to inflation stem from an uncertain fiscal policy and the evolution of the current account deficit, amid a slowing global economy.

Policymakers will meet again on 6 November.

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