In its meeting of September 29, 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 will further monitor domestic and global economic developments so as, by accordingly adjusting its available instruments, to ensure the fulfillment of its objectives of achieving and maintaining price stability in the medium term as well as financial stability.
The analysis of developments in macroeconomic indicators shows a faster disinflation, in line with the central bank’s expectations. The annual inflation rate slid for the third consecutive month to reach 4.25 percent in August versus 7.93 percent in June, amid a steep reduction in volatile food prices and the gradual fading-out of the first-round effect of the VAT hike in July 2010. Moreover, the annual adjusted CORE21 inflation fell to 2.92 percent in August against 4.74 percent in June.
Disinflation is expected to continue in the period ahead, so that annual inflation rate will near the target. The faster disinflation while keeping the monetary policy rate unchanged and amid a moderate leu exchange rate volatility translates into a tightening of real broad monetary conditions aimed at supporting the convergence of inflation towards the medium-term objectives.
The resumption of economic growth continued, albeit at a slower pace, amid a worsening of global risk appetite and of the outlook for growth worldwide, as well as amid increased uncertainties regarding the eurozone sovereign debt crisis. The dynamics of industrial output and exports moderated, while the revival of loans to the private sector, especially leu-denominated lending, remained sluggish. The slower pace of the Romanian economy is expected to be temporarily countered by the good agricultural output in the second half of this year.
The prospects reveal a consolidation of disinflation, but also persistent uncertainties related to developments in the external environment, capital flows, as well as administered and some volatile prices. Therefore, the central bank will gradually adjust the monetary policy stance, in line with these developments and in the context of fulfilling the Romanian authorities’ commitments under the external financing arrangements with international institutions.
Ensuring price stability, together with maintaining financial stability, paves the way for a sustainable cut in the costs of leu-denominated loans, a process fostered by the NBR. The resumption of lasting economic growth should also consider a boost of leu-denominated saving, which would secure sustainability of the external deficit and gradually reduce reliance on external financing.
In this context, the NBR Board decided to keep the monetary policy rate at 6.25 percent per annum, to further pursue an adequate management of liquidity in the banking system and maintain unchanged the minimum reserve requirements for both leu and foreign currency-denominated liabilities of credit institutions.
The NBR will further monitor domestic and global economic developments so as, by accordingly adjusting 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 in the context of fulfilment of commitments under the external financing agreements with the European Union, the International Monetary Fund and other international institutions.
In line with the announced calendar, the next NBR Board meeting dedicated to monetary policy is scheduled for November 2, 2011, when the 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.