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November 25, 2022

BNR keeps unchanged the monetary policy rate at 3.5 pc per annum

At the same time, the central bank decided to lower the minimum reserve requirement ratio on foreign currency-denominated liabilities of credit institutions to 16 pc.

In its yesterday meeting, the Board of the National Bank of Romania decided to keep unchanged the monetary policy rate at 3.5 percent per annum and to pursue an adequate liquidity management in the banking system, a press release informs. Also, the financial institution decided to lower the minimum reserve requirement ratio on foreign currency-denominated liabilities of credit institutions to 16 percent from 18 percent starting with the July 24-August 23, 2014 maintenance period, while keeping unchanged, at 12 percent, the ratio on leu-denominated liabilities. “The BNR is restating that the adequate use of its available tools amid a close monitoring of domestic and global economic developments is aimed at ensuring price stability over the medium term and financial stability”, it said in the quoted document.
The analysis of the latest macroeconomic data shows the annual inflation rate recording low levels, following in the short run a lower path than previously projected, under the impact of one-off factors (developments in volatile prices, particularly volatile food prices, the nominal appreciation of the local currency) and amid the persistent negative output gap and improved inflation expectations. The consolidation of this path in the medium term is still uncertain, BNR shows.
The prudent monetary policy stance and the proper dosage of its toolkit, in line with domestic and external developments, may sustainably ensure medium-term price stability in accordance with the multi-annual inflation target, along with paving the way for balanced and lasting economic growth and for consolidating convergence with the European Union. In this context, the implementation of the structural reform and policy mix agreed under the external financing arrangements with the international institutions, together with balanced social and political developments during the 2014 election year, is likely to consolidate the stability of the Romanian economy, thereby enhancing its resilience to external shocks. According to the announced calendar, the next BNR Board meeting dedicated to monetary policy issues is scheduled for August 4, when the new quarterly Inflation Report is to be examined.
Loans to the private sector further recorded a negative annual growth rate on the back of divergent developments in its components. Thus, it is worth noting the faster positive dynamics of leu-denominated loans, fostered also by the lower interest rates on new loans, reflecting the successive monetary policy rate cuts. At the same time, mention should be made of the persistent contraction in foreign currency-denominated loans whose share in total loans narrowed to 58.6 percent from 62.4 percent in June 2013. The gradual recovery of saving continued, the consolidation of this trend in the medium run being important in view of the faster cross-border deleveraging and the need to ensure stable financing sources for the resumption of lending. The improved perception of investors and rating agencies on the Romanian economy, due to the favourable developments witnessed by its fundamentals, has led to an increase in capital inflows, as also reflected in the domestic currency appreciation.
Foreign exchange reserves, up by EUR 555 M
On another press release, the central bank informed that on June 30th 2014, Romania’s foreign exchange reserves stood at EUR 31,236 million, compared to EUR 30,681 million on May 31st 2014. During the month, the following flows have taken place: EUR 1,372 million inflows, representing changes in the foreign exchange reserve requirements of the credit institutions, inflows into the European Commission’s account, inflows into the Ministry of Public Finances’ accounts a.s.o.; EUR 817 million outflows, representing changes in the foreign exchange reserve requirements of the credit institutions, interest and principal payments on foreign currency public debt a.s.o. Regarding the interest and principal payments on the foreign currency public debt it includes the principal instalments on Romania’s loan from the International Monetary Fund (with the National Bank of Romania’s payments totalizing approximately EUR 230 million equivalent and the Ministry of Public Finances’ payments amounting to approximately EUR 122 million equivalent).
The gold stock remained unchanged at 103.7 tonnes. However, following the change in the international price of gold, its value amounted to EUR 3,206 million. The international reserves of Romania (foreign currencies and gold) on June 30th 2014 stood at EUR 34,442 million, compared to EUR 33,752 million on May 31st 2014. During the month of July 2014, the payments due on public and publicly guaranteed foreign currency denominated debt amount to approximately EUR 404 million.

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