The Board of the National Bank of Romania (BNR) decided on Thursday to keep unchanged the monetary policy rate at 1.75 percent per annum, pursuing the adequate liquidity management in the banking system, a press release informs.
This value is kept at this level since May 2015, when BNR decided to lower the monetary policy rate from 2 percent. In the European Union, Romania has one of the highest monetary policy rates. In Hungary, this key rate is 1.20 percent, while in Poland it is 1.5 percent, 0.05 percent in the Czech Republic and 0.05 percent in the Eurozone countries.
At the same time, the central bank will maintain the existing levels of minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions.
“BNR Board decisions aim to ensure price stability over the medium term in a manner conducive to achieving sustainable economic growth. Moreover, the BNR Board considers that a balanced macroeconomic policy mix and further implementation of structural reforms are pivotal for strengthening the Romanian economy,” the release reads.
BNR is monitoring both domestic and external developments for an adequate use and dosage of all its available tools to fulfil the overriding objective regarding medium-term price stability and preserve financial stability.
Analysts anticipated that BNR will maintain both the key interest rate and the level of minimum mandatory reserves at the March 31, 2016.
“The BNR has no room to reduce the key rate, as underlying inflationary pressures are not low, domestic demand and wage earnings are expanding rapidly, and the reversal of the fiscal consolidation trend is a source of risks in terms of macroeconomic stability,” the analysts said.
However, the currently very low levels of money market interest rates and the anticipated upward trend in the inflation rate should prompt the central bank to tighten the monetary policy stance in the coming period, they added.
Analysts also said that although lending acceleration on top of an already strong buoyant demand increases the pressure on the BNR to tighten the lending conditions, it is unlikely to change the key rate before September.