At the same time Central Bank representatives have decided to keep the inflation rate target at 3 pc plus/minus one percentage point in 2012 and at 2.5 pc starting in 2013.
The Central Bank’s Administration Board (CA) maintained yesterday the key interest rate at 6.25 per cent per year, its historical low ever since the adoption of the current monetary policy model, a communiqué remitted by the National Bank of Romania (BNR) informs. Since the start of this year the central bank has already reduced the monetary policy interest rate three times, lowering it from 8 per cent to 6.50 per cent, and then reduced it by another 0.25 per cent to 6.25 per cent per year, the level it currently stands at. The CA also decided to maintain the rates for minimum required reserves applicable to RON-denominated and forex-denominated liabilities at 15 per cent and 25 per cent respectively. BNR representatives reiterated that the Central Bank seeks to properly manage the banking system’s liquidity.
BNR’s CA also analyzed and approved on Tuesday the quarterly report on inflation, a report set to be presented tomorrow. According to the press communiqué, BNR decided to maintain the inflation rate target for 2012 at its 2011 level of 3 per cent (plus/minus one percentage point) and to adopt a stationary target of 2.5 per cent (plus/minus one percentage point) starting in 2013. The targets will be discussed with the government. BNR did not fall within the inflation rate target in the last three years and estimates that the annual rate will surpass the targeted interval at the end of this year too, as a consequence of the 5 per cent VAT hike applied in July. This was the CA’s last monetary policy meeting scheduled this year. Its first monetary policy meeting for 2011 is scheduled on January 5.
Many analysts have anticipated the move to maintain the monetary interest rate at a historical low, considering that at this moment an increase would have placed added pressures on the incompletely recovered Romanian economy. In what concerns the level of minimum required reserves, they also staked on a decision to maintain them, adding however that there could have been a certain probability to see an increase in those applicable to forex-denominated liabilities. Nicolae Chidesciuc, chief economist ING Bank, considers that Q1 of 2011 will see the risk of having an increase in the monetary policy interest rate as a consequence of the inflationary pressures that might be caused by foodstuff prices. “There are two reasons for these price hikes: the increase in the price of staple products at international level and Romania’s poor agricultural output this year. BNR at least suggested that it plans to maintain the interest rate but the inflation rate’s evolution could force it to hike it,” the ING Bank’s chief economist explained.