Romania’s central bank kept unchanged the monetary policy interest rate at 3.5% at its May 6 monetary policy board meeting, which was in line with the expectations of bank experts. Also in line with expectations, the monetary authority kept unchanged the minimum reserve requirements – at 12% for local currency liabilities and at 18% for foreign currency liabilities.

The central bank also announced that it would pursue an adequate liquidity management in the banking system.

A poll of bank analysts conducted last week revealed their expectations for steady monetary policy interest rates by the end of 2014 and possibly even by the end of next year. Experts also believe that the central bank would cut the minimum reserve requirements by some 2pps from the current levels by the end of 2015.

The central bank expects the marginal shift from foreign currency to local currency lending, seen in the share of forex loans shrinking from above 60% to 59.5% for a first time in five years, to increase the efficiency of the monetary transmission mechanism.

The improvement in the economic activity in Romania has further been fostered by the exports' growth and the favourable performance of the industrial sector, as well as by the gradual consolidation of consumption, the central bank concluded.

External and internal balances have consolidated, the monetary authority also says. Looking at the external sector, the current account and the international reserves remain in a comfortable zone, while a substantial part of Romania’s external public debt has been repaid. The domestic price stability is visible in the central bank’s expectations for the headline inflation to remain within the target band in the coming two years.