In its meeting of June 30, 2010, the Board of the National Bank of Romania decided the following:
- to keep unchanged the monetary policy rate at 6.25 percent per annum;
- to ensure firm management of liquidity in the banking system;
- to maintain the existing levels of minimum reserve requirement ratios on both leu-denominated and foreign currency-denominated liabilities of credit institutions.
The NBR is vigilantly monitoring domestic and global economic developments so that, via an adequate use of its available instruments, to ensure the fulfilment of its objectives of achieving and maintaining price stability in the medium term as well as financial stability.
The annual inflation rate was 4.42 percent in May versus 4.28 percent in April in the context of a depreciating leu, amid worsening risk perception regarding the economies in the region and given that some domestic risks related to fiscal and income policies have materialized.
Although headline inflation has dropped relatively slowly, the annual adjusted CORE2 inflation1 hovered around 2 percent over the past five months, being below the 2.8 percent level in December 2009.
The analysis of macroeconomic developments shows a persistent economic decline in the first quarter of this year after the severe contraction in the year before, while the current account deficit is seen remaining at sustainable levels.
As the increased value added tax will immediately trigger a significant rise of consumer price levels – and consequently a temporary pick-up in inflation – the NBR will act to limit the second-round effects of this measure and firmly anchor inflation expectations at low levels.
The risk related to the above-mentioned effects, together with persistent uncertainties surrounding the results of fiscal consolidation efforts as well as of those regarding the developments in the world economy, requires a continued prudent monetary policy stance.
In this context, the NBR Board has decided to keep unchanged the monetary policy rate at 6.25 percent per annum and to maintain the existing levels of minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions. It also decided to ensure firm management of liquidity in the banking system.
These decisions are aimed at ensuring further disinflation in line with the medium-term objectives, a sustainable revival of lending in the Romanian economy, especially of loans to the private sector, as well as avoiding excessive exchange rate volatility.
The NBR is vigilantly monitoring domestic and global economic developments so that, via an adequate use of its available instruments, to ensure the fulfilment of its objectives of achieving and maintaining price stability in the medium term as well as financial stability. These will create favourable conditions for a sustainable economic recovery.
The NBR Board reaffirms that further compliance with the commitments set under the multilateral external financing arrangement with the European Union, the International Monetary Fund and other international financial institutions is essential in order to ensure a sustainable resumption of disinflation, to maintain financial stability and to achieve lasting economic recovery.
According to the calendar, the next NBR Board meeting dedicated to monetary policy issues is scheduled for August 4, 2010, when a new quarterly Inflation Report is to be examined.
1) Calculated by the NBR by excluding administered prices, volatile prices, and tobacco and alcohol prices from the consumer price index.