Romanian central bank cuts policy rate to 3%

By bne IntelliNews September 30, 2014

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The Romanian central bank announced on September 30 that it will lower its monetary policy rate from 3.25% to 3.0% from October 1. 

The rate cut was widely expected, and follows an earlier reduction in the monetary policy rate from 3.5% on August 5.

ING  wrote on September 29 that they expected the cut to be announced after the September 30 National Bank of Romania (NBR) board meeting. “This should prove neutral for the market,” said an analyst note. 

Romania has had a steady fall in inflation this year, driven by falling food prices. In August 2014, consumer prices were down 0.3% compared to the previous month, according to the latest data from the National Institute of Statistics. 

The Romanian economy re-entered recession in the second quarter of 2014, after an impressive recovery last year. The economy contacted by 1.0% in the second quarter of 2014 compared to the previous quarter, when GDP declined by 0.2%. 
 
After the board meeting, the NBR said it has also resolved to pursue adequate liquidity management in the banking system, and to reduce minimum reserve requirements ratio on leu-denominated liabilities of credit institutions from 12% to 10% from the October 24 - November 23 maintenance period. However, the bank will maintain the minimum reserve requirements ratio on foreign currency-denominated liabilities at 16%.

The NBR also decided to narrow the symmetrical corridor of interest rates on its standing facilities around the policy rate to plus or minus 2.75 percentage points, down from plus or minus 3 percentage points. 

“The NBR reiterates its commitment to the adequate use of all its available instruments, on the background of close monitoring of domestic and global economic developments, with the aim of securing the achievement of its overriding objectives of medium-term price stability and the preservation of financial stability,” the NBR said in a statement. 

 

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