The NBR Board decided to cut the policy rate by 0.5 of a percentage point to 16.5 percent
17.01.2005
In its meeting of 14-15 January 2005, the NBR Board made an overview of the latest macroeconomic developments and their prospects for 2005.
Following the slowdown in the rate of increase of consumer prices over the past two months, the 12-month inflation rate plunged to 9.3 percent in December, close to the inflation target for 2004.
Against this backdrop, the short-term inflation projection was revised in order to incorporate the effects of the change in some assumptions regarding administered price adjustment, exchange-rate movements and larger disposable income in the wake of the alteration of tax rates.
The NBR Board decided to lower the policy rate by half of a percentage point to 16.5 percent considering the step-up in disinflation over the recent months. Thus, in the last 12 months, policy rate was cut by 4.75 percentage points whilst inflation rate dropped by 4.80 percentage points.
Moreover, the NBR Board decided to reduce the interest rate on lending facility (Lombard rate) from 30 percent to 25 percent and to leave the interest rate on deposit facility unchanged at 5 percent.
The interest paid on ROL-denominated required reserves established by credit institutions is cut from 6 percent to 4 percent and the penalty rate on deficit reserves is down from 45 percent to 37 percent.
As the recent developments and the outlook for demand-pull inflation and cost-push inflation reveal the risk of inflationary pressures, the NBR Board decided to maintain a cautious monetary policy stance in order to meet the inflation targets, including those on a longer time horizon, amid the preparations for shifting to inflation targeting.