In its meeting of May 7, 2018, the Board of the National Bank of Romania has decided, according to a release posted on its website, the following: to increase the monetary policy rate to 2.50 percent per annum from 2.25 percent per annum as of 8 May 2018; to raise the deposit facility rate to 1.50 percent per annum from 1.25 percent per annum and the lending facility rate to 3.50 percent per annum from 3.25 percent per annum as of 8 May 2018; to maintain the existing levels of minimum reserve requirement ratios on both RON – and foreign currency-denominated liabilities of credit institutions.
BNR Governor explains
In a briefing Monday afternoon, BNR Governor Mugur Isarescu said the decision to increase the monetary policy rate comes in the context of new information about inflation. Isarescu argued the inflation will slightly increase and then will be capped in the following months, ziare.com reports.
“The report on inflation, May 2018 edition, includes the latest information available (…) and reconfirms the prospect of slight growth and then the capping of the annual inflation rate for several months, then, by the end of the year, it would stabilize at the upper limit of the interval. As compared to the previous report, the trend of the forecasted annual inflation rate is within the intervals anticipated in previous prognosis,” Isarescu said.
The BNR Governor added that uncertainties come from administrated prices, from the labour market and from the developments on the international oil market.
According to the BNR report, the figures on economic growth reveal higher deceleration than the previous one in Q4 2017, with robust dynamics of 6.6%.
The trade balance of goods and services is deteriorating and, consequently, the current account deficit grew in the first two months of 2018 against the similar period last year.
In April, BNR strengthened the control over the liquidity in the banking system, starting operations to attract term deposits, with interest rates at the level of the monetary policy rate, with full allotment.
Isarescu, on the talks with Liviu Dragnea and Viorica Dancila
The BNR Governor, referring to the recent talks with PM Viorica Dancila and PSD leader, Chamber of Deputies Speaker, Liviu Dragnea on the monetary policy rate and monetary market developments, said it was a serious, normal discussion.
Asked by reporters if Dragnea would understand the reasons behind the decision to increase the monetary policy rate, Isarescu said that “they say what the popular vote wants, we say what the economy wants. We work with the markets, they deal with the opinion polls. Our job is not an easy one, it’s tough,” BNR’s Isarescu said.
He added that ‘harmonization’ sounds all right, it was a media war. “Some of the statements really hurt us,” the Governor said. “I can’t say we are in complete harmonization now, but we are all right,” Isarescu also said.
Mugur Isarescu said the discussions included the letters (between Dragnea and BNR – our note) and now the letters are available to the press. “It’s better to understand that the economic problems are not at all simple and do not rely on negotiations. (…) The economic issues are more complicated. (…) The economy reacts through human behaviour. It’s complicated. I am almost 70 and I can’t say I learned everything about the economy. (…) It was a serious discussion and the basic were the topics in the two letters,” Isarescu said.