In meeting, the Board of the National Bank of Romania (BNR) decided to keep the monetary policy rate unchanged at 5.25 per cent per annum, a press release informs. Also, BNR Board decided to ensure adequate liquidity management in the banking system and to maintain the existing levels of minimum reserve requirement ratios on both RON (15 pc) and foreign currency-denominated liabilities of credit institutions (20 pc).The decision made by the Board of BNR is in line with the expectations of economic analysts, which predicted that the Central Bank will keep unchanged its monetary policy rate at 5.25 pc and the reserve requirement ratios yesterday and through the entire year 2013. According to information obtained and made public by Mediafax, the Central Bank announced the IMF during the evaluation mission that was in Romania on January 15-29, that it will not lower the minimum reserve requirement ratios of banks, in both RON and foreign currency, and will keep the monetary policy rate at 5.25 pc for the coming months.Moreover, the members of the Romanian Association of Financial-Banking Analysts (AAFBR) anticipate that, at the end of 2014, BNR might relax the monetary policy by lowering the key interest rate at 4.75 pc in December. “Year 2014 might bring a relaxation of the monetary policy, through a reduction of the monetary policy rate to 4.75 pc in December 2014. The National Bank of Romania might lower the minimum reserve requirement ratios to 12 pc for RON denominated liabilities and to 18.5 pc for those denominated in foreign currency, in December 2014,” AAFBR recently informed in a press release. In the meeting of January 7, the Board of BNR kept unchanged the key interest rate, at 5.25 pc, and the cash reserve ratios for RON and foreign currencies.Last year, at the end of March, the Central Bank reduced the monetary policy rate by 0.75 percent points, to the historic minimum of 5.25 pc per annum, as the cycle of lowering the monetary policy rate was maintained against the background of political changes in Romania, superimposed to investors’ worsening fears about the future of the euro zone. The BNR Board has examined and approved the quarterly Inflation Report, which will be released to the public in a press conference on February 7.
Inflation level depends on volatile price developments
BNR estimate that inflation will reach 5-6 per cent in the first half of the year, after which it will go down, but its level will depend very much on the volatile price developments, such as those in agriculture, said yesterday the central bank governor Mugur Isarescu in a press conference. Asked about the impact of higher gas and electricity prices on food prices, Isarescu said he did not believe the impact will be major.The annual inflation rate picked up to reach 4.95 per cent in December 2012, remaining outside the variation band around the target and above the December 2011 reading of 3.14 per cent. The annual inflation rate at end 2012 was marginally below the latest BNR projection of 5.1 per cent. However, the average annual inflation rate kept falling to a 23-year low of 3.33 per cent. The annual adjusted CORE2 inflation rate remained at 3.3 per cent in December 2012 for the third consecutive month, BNR’s detailed press release shows. The path of the annual inflation rate in 2012 H2 shows the adverse impact of supply-side factors – beyond the scope of monetary policy –, largely the higher domestic and global food prices and administered price adjustments, against the background of sharper exchange rate volatility. The magnitude of the adverse impact on inflation coming from these factors was however partially moderated by the persistence of a significant negative output gap. The statistical data suggest a near stalemate in economic activity in 2012 from the previous year amid a drought-induced drop in agricultural production and protracted euro area recession, which hurt Romania’s net exports and industrial output. Monetary developments also pinpoint the real annual dynamics of loans to the private sector remaining in negative territory, similarly to credit developments in the euro area and the other countries in the region. BNR’s decisions about monetary policy are aimed to ensure the resumption and the subsequent consolidation of disinflation, thus creating the necessary prerequisites for a gradual recovery of lending to the Romanian private sector and sustainable economic growth in the new European and global context. BNR Board reaffirms that it will closely monitor domestic and global economic developments so as, by adjusting its available instruments accordingly, to ensure price stability over the medium term, as well as financial stability.