The policymaking group of National Bank of Romania left its benchmark interest rate at 8% and required reserve ratio for leu liabilities at 15% and for fx liabilities at 30% in the last rate-setting session of the year.
The central bank’s decision to keep key rate on hold came as a surprise to analysts who expected a 25basis point cut in today’s session. They also predicted a reduction in reserve requirements.
“The National Bank of Romania decided to keep monetary policy rate and required reserve ratio at the current levels, due to uncertainties persisting in the market. The series of rate cut will be resumed when we will return within the parameters agreed with the International Monetary Fund, and when political commitments will be made to put an end to the growing uncertainties”, Ionut Dumitru, senior economist of Raiffeisen Bank told Wall-Street.
In today’s rate-setting session, the central bank has also set the annual inflation target for 2011 at 3.0 percent with +/-percentage point tolerance band. The inflation target is to be discussed with the government.
The annual inflation rate fell to 4.94% in September, the lowest level since July 2007, but which remains high compared to other European Union countries.
The new target announced by NBR is important for meeting the objectives assumed for joining the euro area in January 2015, which involves the reduction of the inflation rate close to euro area average. Economists say the assumed target is extremely ambitious as the excises and administrated prices will lead to an increase in inflation rate.
