Romanias central bank to keep key interest rate unchanged on rising inflation.

By bne IntelliNews May 3, 2011
None of the Romanian bankers, surveyed by Ziarul Financiar daily, expected the central bank to cut the 6.25% monetary policy interest rate in todays meeting, while some of them even predicted rate hikes today or during the next 12 months to fight inflationary pressures. The prevailing view was that the monetary authority would keep the interest rate at its current level, as well as the required reserve ratios at 15% and 20% levels for domestic and forex currency liabilities, respectively, by the end of the year. We recall that the policy interest rate is defined for the one-week deposit taking. The central bank will also approve today the Quarterly Inflation Report, under which it is expected to increase the projections for the yearend inflation from 3.6% y/y currently. Earlier in March, the central bank hiked the yearend projection from 3.4% y/y to 3.6% y/y and later in April advisor to governor Mugur Isarescu, Adrian Vasilescu, hinted another upward adjustment. Independent projections are at 5-6% y/y, but the central banks projection will remain below 5%, Vasilescu said at that time. The central bank's inflation aim under the inflation targeting policy is 3% +/-1pps for the yearend. The effects of the VAT rate hike in July 2010 will vanish through H2 this year, but the annual inflation has already reached 8% y/y in March, while the effects of the high commodity prices still affect consumer prices.

Romanias central bank to keep key interest rate unchanged on rising inflation.

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