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Romania Monetary Policy July 2019

Romania: NBR stays put in July

On 4 July, 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 broadly in line analysts’ expectations.

Despite elevated inflation in recent months (May: 4.1%), policymakers were reluctant to hike rates on concerns that a stronger leu would have widened the country’s external imbalances. Officials assessed that demand headline inflation would remain above its 1.5%–3.5% target band through the short-term horizon before settling somewhere within it next year.

Looking ahead, despite high inflation, policymakers softened their hawkishness against the backdrop of an increasingly dovish ECB and U.S. Federal Reserve. Meanwhile, on 4 July, Governor Mugur Isarescu, the longest serving central bank governor in the world, secured another five-year mandate, ensuring policy continuity ahead.

Policymakers will meet again on 5 August.

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