The Board of the National Bank of Romania decided on Thursday (Feb.7) to keep its benchmark interest rate on hold at 2.5 percent at its first monetary policy meeting this year. The central bank’s decision was in line with economists’ expectations.
The deposit and lending facility (Lombard) rates were also kept unchanged at 1.5 percent and 3.5 percent, respectively while the reserve requirement on both leu- and foreign-currency denominated liabilities was also left unaltered.
The bank raised its benchmark interest rate three times last year to the current 2.50 percent, tightening policy to curb inflation, which soared to 5.4 percent in May and June 2018 (the highest rate since June 2013), but slowed to 3.4 percent in November and 3.3 percent in December 2018. The current BNR forecasts show inflation standing at 2.9 percent in December 2019.
“In today’s meeting, the NBR Board examined and approved the February 2019 Inflation Report, which incorporates the most recent data and information available. The new scenario of the projection reconfirms the prospects for the annual inflation rate to decline further during the next three quarters to values even slightly below the previously anticipated ones, before climbing and remaining slightly beneath the upper bound of the target band until the end of the forecast horizon” the central bank said in a press release.
Policymakers stated that risks related to the inflation outlook stem from the new set of fiscal and budgetary measures effective 1 January 2019, as well as from the still pending draft budget and hence from the future fiscal and income policy stance. Also important are the uncertainties surrounding the pace of euro area and global economic growth, the international oil price developments, the monetary policy stances of the ECB and of central banks in the region.
“The NBR Board decisions aim to ensure and preserve price stability over the medium term in a manner conducive to achieving sustainable economic growth and amid safeguarding financial stability. The NBR Board underlines that the balanced macroeconomic policy mix and the implementation of structural reforms designed to foster the growth potential over the long term are of the essence in preserving a stable macroeconomic framework and strengthening the capacity of the Romanian economy to withstand potential adverse developments” the bank added.
The next monetary policy meeting of the Board of the National Bank of Romania is scheduled for 2 April 2019. The account (minutes) of discussions underlying the adoption of the monetary policy decision during February's meeting will be posted on the NBR’s website on 14 February 2019.
Focus Economics Consensus Forecast panelists expect the policy rate to end 2019 at 2.79 percent and at 3.19 percent in 2020.
Romania's interest rate averaged 5.52 percent from 2005 until 2019, reaching an all time high of 12.50 percent in May of 2005 and a record low of 1.75 percent in May of 2015 according to Trading Economics.