In its meeting of February 3, 2011, 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 adequate 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 Board has examined and approved the quarterly Inflation Report, which will be released to the public in a press conference scheduled for February 7, 2011, along with a 12-month calendar of NBR Board meetings dedicated to monetary policy issues.
The annual inflation rate rose to 7.96 percent in December 2010, in line with the NBR forecasts, although significantly above the upper limit of the variation band around the target. The 2010 rise in the annual inflation rate (from 4.74 percent in 2009) was mainly the result of the standard VAT rate hike, to which the adverse impact of trends in food and fuel prices on international markets also contributed.
The analysis of statistical indicators shows the persistence of aggregate demand deficit, of a current account deficit at sustainable levels and of the negative annual real dynamics of credit to the private sector.
Meanwhile, it is worth noting the ongoing normalization in the level of bank rates for non-bank customers, along with improved liquidity conditions on the money market.
The current forecast reveals the prospects of resumption in disinflation early in 2011 and its quickening once the first-round effects of the VAT hike have begun to dissipate. This implies a configuration of real monetary conditions in order to ensure a firm anchoring of inflation expectations so as to prevent the risks regarding second-round effects related to supply-side shocks.
The risks related mainly to factors outside the central bank's influence – administered price adjustments, consistent continuation of the fiscal consolidation and structural reforms as well as future developments in external agri-food and commodity prices as well those arising from the international economic environment - require a further prudent monetary policy stance.
In this context, the NBR Board decided to leave unchanged the monetary policy rate at an annual 6.25 percent and to continue to pursue an adequate management of liquidity in the banking system. Moreover, the NBR Board decided to maintain the existing levels of minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions.
The NBR Board is restating that the firm and thorough implementation of commitments agreed under the ongoing as well as upcoming financing agreements with international institutions is essential to further consolidate disinflation at the pace that would ensure the achievement of the medium-term targets and to restore confidence, a key pillar for a sustainable recovery of the Romanian economy.
In this context, the NBR will vigilantly monitor domestic and global economic developments so as, via an adequate use of its available instruments, to ensure the fulfilment of its objectives of achieving and maintaining price stability as well as financial stability.
The NBR Board has examined and approved the quarterly Inflation Report, a document that assesses developments in the recent macroeconomic environment and the inflation outlook, and identifies the main challenges and risks to monetary policy in the period ahead. The quarterly Inflation Report will be released to the public in a press conference scheduled for February 7, 2011, along with a 12-month calendar of NBR Board meetings dedicated to monetary policy issues.