Romania: Central Bank cuts policy rate for the second time in a row
August 5, 2013
At its 5 August meeting, the National Bank of Romania (NBR) cut the monetary policy rate by 50 basis points to 4.50% for the second time in a row. The move surprised the market, which had expected the Bank to cut the rate by only 25 basis points. Monetary authorities decided to ease policy further because inflation is expected to continue on a downward trend and domestic growth remains weak. The Bank, however, left its minimum reserve requirements on both the leu and foreign-exchange deposits unchanged.
The Bank noted that inflation was in line with its projections and that it will fall within the Bank's target later this year, once the previous year's seasonal effect subsides. According to the NBR, economic growth is likely to pick-up going forward.
The Bank praised the agreement the government reached with the International Monetary Fund and the European Union on a EUR 4.0 billion loan. The next monetary policy meeting is scheduled for 30 September.
FocusEconomics Consensus Forecast panellists do not expect the Central Bank to further cut interest rates this year, resulting in an average year-end rate of 4.66%. For 2014 the panel foresees the rate closing the year at 4.64%.