In its meeting of 5 August 2013, The Board of the National Bank of Romania decided the following:
- To lower the monetary policy rate to 4.5 percent per annum from 5.0 percent starting with August 6, 2013;
- To pursue an 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 Board has examined and approved the new quarterly Inflation Report, which will be released to the public in a press conference scheduled for 7 August 2013.
The latest macroeconomic data show the inflation rate moving in line with the central bank’s previous forecasts and the prospects of its falling within the target band once the statistical effects of the summer 2012 supply-side shocks fade away.
The adjusted CORE2 inflation rate 1 saw a consolidation of its downward path, its annual rate coming in at 2.85 percent in June 2013 versus 3.03 percent in March and 3.25 percent in December 2012. The annual inflation rate measured by the Harmonised Index for Consumer Prices, a relevant indicator to ensure EU‑wide comparability and to assess the degree of convergence with the European Union, ran at 4.5 percent in June 2013, similarly to the preceding months.
The pick-up in economic growth in 2013 Q1 was driven by net exports, which had a bearing on the good performance of both manufacturing and current account. Nevertheless, final consumption nearly stalled, while the real annual dynamics of loans to the private sector have stayed in negative territory.
Stronger volatility in investors’ risk appetite and the persistence of uncertainties surrounding economic activity in Europe and elsewhere temporarily entailed wider fluctuations in the leu exchange rate.
Moreover, the fact that interbank money market rates and yields on government bonds have recently been close to or even below the policy rate points to the consolidation of the monetary policy impulse transmission. However, the pass-through of the policy rate cut to interest rates on new corporate and household loans in domestic currency remains relatively slow.
In today’s meeting, the NBR Board has examined and approved the quarterly Inflation Report, which foresees faster disinflation in the period ahead, along with a pick-up in economic growth.
Against this backdrop, the Board of the National Bank of Romania has decided to lower the monetary policy rate to 4.5 percent per annum from 5.0 percent previously. Hence, starting with 6 August 2013, the interest rate on the NBR’s lending facility (Lombard) will be lowered to an annual 7.5 percent from 8.0 percent, while its deposit facility rate will stand at 1.5 percent per annum. The NBR Board has also decided to continue to pursue an adequate liquidity management in the banking system and to leave unchanged the existing levels of minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions.
The NBR Board considers that the necessary conditions are in place for a cautious adjustment of monetary conditions by adequately calibrating its policy tools in order to ensure the consolidation of disinflation, and the necessary prerequisites exist for a recovery of lending to the private sector, restoring confidence and achieving balanced and lasting economic growth.
Furthermore, the prospects for concluding a new precautionary arrangement with international financial institutions are seen consolidating the stability of the macroeconomic framework and boosting structural reforms, thereby strengthening the resilience of the domestic economy to external shocks.
The NBR reiterates that it will closely monitor domestic and global economic developments so as, via the proper calibration of the monetary policy conduct and the adequate use of its available tools, to ensure price stability over the medium term and financial stability.
The new quarterly Inflation Report will be released to the public in a press conference on 7 August 2013. In line with the announced calendar, the next NBR Board meeting dedicated to monetary policy issues is scheduled for 30 September 2013.
1Calculated by excluding administered prices, volatile prices, as well as tobacco and alcohol prices from the consumer price index.
Video (Romanian only):
» Press briefing, 5 August 2013
» Press conference, 7 August 2013 - quarterly inflation report