According to the press release of National Bank of Romania, in its meeting of 7 February 2020, the Board of the National Bank of Romania decided the following: to keep the monetary policy rate at 2.50 percent per annum; to leave unchanged the deposit facility rate at 1.50 percent per annum and the lending facility rate at 3.50 percent per annum; to cut the minimum reserve requirement ratio on foreign currency-denominated liabilities of credit institutions to 6 percent from 8 percent starting with the 24 February – 23 March 2020 maintenance period and to maintain the minimum reserve requirement ratio on leu-denominated liabilities at 8 percent.
The annual CPI inflation rate went up in December 2019 to 4.0 percent from 3.8 percent in November, i.e. above the variation band of the flat target and slightly higher than the forecast. The rise versus end-Q3, when it dropped to 3.5 percent, owes mainly to the faster dynamics of fuel prices, inter alia amid a base effect, but also to the notable hike in fruit prices, as well as to the acceleration in core inflation.
The annual adjusted CORE2 inflation rate (which excludes from the CPI inflation administered prices, volatile prices, and tobacco product and alcoholic beverage prices) continued to increase in December to a higher-than-forecasted level, reaching 3.7 percent from 3.5 percent in November and 3.4 percent in September. The advance reflected almost entirely the trend seen on the food segment, affected by the rise in some international agri-food prices, which overlapped with the significant inflationary pressures from demand and unit labour costs.
In December, the average annual CPI inflation rate remained at the 3.8 percent level reported in November; calculated based on the Harmonised Index of Consumer Prices, the average annual rate picked up to 3.9 percent from 3.8 percent in October and November.
In its meeting of 7 February 2020, based on the currently available data and assessments, the NBR Board decided to keep the monetary policy rate at 2.50 percent per annum, while maintaining strict control over money market liquidity. Moreover, the NBR Board decided to leave unchanged the deposit facility rate at 1.50 percent per annum and the lending (Lombard) facility rate at 3.50 percent per annum.
Given the developments in foreign currency lending and the adequate level of forex reserves, the NBR Board decided to cut the minimum reserve requirement ratio on foreign currency-denominated liabilities of credit institutions to 6 percent from 8 percent starting with the 24 February – 23 March 2020 maintenance period. The measure also aims to continue the harmonisation of the minimum reserve requirements mechanism with the relevant standards and practices of the European Central Bank and the major central banks across the European Union. The minimum reserve requirement ratio on leu-denominated liabilities remains unchanged at 8 percent.
The NBR Board’s 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.
For further information: National Bank of Romania