In its meeting of 7 January 2013, the Board of the National Bank of Romania decided the following:
- To keep the monetary policy rate unchanged at 5.25 percent per annum;
- To ensure adequate liquidity management in the banking system;
- To maintain the existing levels of minimum reserve requirement ratios on both leu and foreign currency-denominated liabilities of credit institutions.
The NBR will closely monitor domestic and global economic developments so as, via an optimal dosage of its instruments, to ensure the fulfilment of its objectives to achieve price stability over the medium term and to maintain financial stability.
The analysis of the latest developments in macroeconomic indicators points to a halt in the upward trend of the annual inflation rate, as well as to a slow recovery in Romania’s economy amid the recession in euro area economies.
The annual inflation rate fell to 4.56 percent in November 2012 from the 5.33 percent peak of September 2012, thereby confirming the gradual fading of the inflationary effect coming from supply-side factors. The annual adjusted CORE21 inflation rate remained at 3.3 percent in November 2012.
The feeble dynamics of industrial production and retail trade, as well as the protracted euro area recession entailing adverse effects on Romanian exports suggest the persistence of the negative output gap.
At the same time, similarly to the economic developments in most EU Member States, the expansion in lending to the private sector is slowing down. Its components show diverging trajectories, with a reduction in foreign currency-denominated loan dynamics.
The monetary policy remained prudent, seeking to anchor inflation expectations and pave the way for the annual inflation rate to near the medium-term target.
The NBR’s firm liquidity management in the recent period, together with the compliance with the assumed fiscal and budgetary parameters, completion of the electoral process and the new government taking office, contributed to an improvement in investors’ sovereign risk perception, which helped alleviate pressures on the exchange rate and interbank rates.
Prospects remain favourable for the annual inflation rate to return inside the target band by the end of the year, but risks and uncertainties related to the developments in the external environment, capital flows, administered prices and some volatile prices still persist.
In this context, the NBR Board decided to keep the monetary policy rate unchanged at 5.25 percent per annum, to ensure an adequate liquidity management in the banking system and to maintain the existing levels of minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions.
These decisions are aimed at resuming and consolidating disinflation, whose outlook is further marked by risks and uncertainties related to domestic developments, including the persistence of structural rigidities across the Romanian economy as well as the euro area and global economic recovery.
Maintaining a prudent stance of monetary policy, also through an optimal dosage of the central bank’s instruments, is essential for achieving medium-term objectives on price stability and financial stability, paving the way for sustainable economic growth. Both processes will help ensure the necessary conditions for a lasting reduction in the interest rate on leu-denominated loans, foster saving in local currency and secure sustainability of the external deficit by containing the reliance on external financing.
The NBR Board reiterates that the NBR closely monitors domestic and global economic developments so as, via an adequate dosage of its instruments, to ensure price stability over the medium term and financial stability.
In line with the announced calendar, the next NBR Board meeting dedicated to monetary policy issues is scheduled for 5 February 2013, when the new quarterly Inflation Report is to be examined.
1 Calculated by excluding administered prices, volatile prices, as well as tobacco and alcohol prices from the consumer price index.
» Video: Press briefing, 7 January 2013 (Romanian only)