Romanian central bank keeps policy interest rate unchanged at 5.25%.

By bne IntelliNews March 29, 2013

Romania’s central bank said it maintained unchanged at 5.25% the monetary policy rate charged on one-week funds made available under repo deals. It also kept unchanged the other elements of the monetary policy - the required reserve ratios [15% for local currency, 20% for forex currency liabilities] and the broad indication for the tightness of its conduct in controlling the money market liquidity, a statement issued after the monetary board’s March 29 meeting said. Currently, the central bank runs an adequate liquidity management, shifting from the firm liquidity management kept in November and December.

The central bank also said it keeps a prudent monetary policy aimed at firmly anchoring inflation expectations that are challenged by transitory inflationary episodes and volatile capital flows -- caused by resurgent tensions in the eurozone that push down investors’ risk appetite. The inflation outlook remains largely benign with annual inflation expected to ease – yet remaining outside the target inflation band for the coming months. The annual adjusted CORE2 inflation* rate stood at 3.1% in February, marginally below the 3.2% figure in January 2013, according to the monetary authority’s calculations. The central bank’s separate CORE2 calculation also eased to 3.5% in February from 3.64% in January. The headline inflation slowed down to 5.65% in February from 5.97% in January.

The monetary transmission mechanism has strengthened recently as the money market interest rates converged to the monetary policy interest rate, the central bank concluded. In the previous quarters, the central bank openly embarked alternative strategies to compensate for the loose transmission mechanism -- such as controlling the money market liquidity.

* Romania’s central bank calculates own CORE2 inflation rate by subtracting a slightly different set of prices from the headline consumer price index.


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