The National Bank replaces the discount rate with the reference rate starting February
30.01.2002
During the past few years, the macroeconomic environement in Romania has seen a structural liquidity surplus in the banking system, due mainly to the relative increase of capital inflows. The fact that banks had alternative sources of financing resulted in the gradual decrease in refinancing. Thus, the central bank had to perform sterilisation operations in order to avert inflationary pressures caused by the liquidity surplus in the market. The prevalence of sterilisation operation is common to most EU accession countries in Central and Eastern Europe, not only to Romania.
Taking into account the gradual loss of relevance by operations such as refinancing and rediscounting, which no longer define the current monetary policy of the National Bank of Romania, replacing the discount rate with a reference rate for the operations carried out by the central bank is seen as a necessary measure resulting from the development of monetary conditions. Furthermore, the replacement was needed as for the following three years at least sterilisation will play an important role in NBR's operations, which is also mentioned in Romania's Medium-term Economic Strategy issued in March 2000 and submitted to the European Commission.
Renewed resort to the discount rate is unlikely under the circumstances of EU integration that led the National Bank of Romania to harmonise its procedures with those of the European Central Bank, which - similar to many other central banks - does not include the discount rate among the instruments used.
Consequently, the discount rate will be replaced by the reference rate of the National Bank of Romania and will be computed so as to mirror the conditions prevailing on the money market. For the next period, the new interest rate shall be calculated as an arithmetic mean weighted to the volume of transactions, of the interest rates on NBR's deposit-taking and reverse-repo operations in the month prior to that of the announcement. The reference rate will be made public through press releases and circulars of the National Bank of Romania on the first working day of each month. The aforementioned information will also be included in the monthly bulletins of the central bank and in its website (http://www.bnro.ro/def_en.htm).
The reference rate shall come into force as of 1 February 2002 through a circular issued by the NBR repealing the provisions of Circular No. 11/1998 on the official discount rate and establishing the reference rate for February 2002.
It is worth mentioning that the changeover from discount rate to reference rate will not generate any shocks, as the two indicators have close values at present.