In its meeting of 28 December 2006, the Board of the National Bank of Romania has decided to:
- maintain the monetary policy rate at 8.75 percent per annum;
- pursue control over liquidity in order to ensure monetary conditions consistent with the achievement of medium-term disinflation objectives.
According to the latest statistical data, developments in macroeconomic indicators show the continuation of the disinflation process, with the inflation rate running at 4.67 percent in November 2006 versus the same year-ago period, and a significant acceleration of economic growth against the background of larger investment and persistently fast consumption dynamics, both supported by the rapid expansion of credit.
The substantial reduction in the rate of inflation to less than 5 percent at end-2006 from 8.6 percent at end-2005 is attributable to the restrictive stance of monetary and fiscal policies, as well as to the slowdown in the growth of administered prices and volatile food prices. The consolidation of an average rate of inflation below 5 percent per annum - a key component for the continuation of the integration process - requires, however, sustained economic and financial efforts, backed by a mix of adequate macroeconomic policies, over a longer period of time.
The short-term outlook indicates a continuation of the disinflation process given the estimates of moderate pressures from administered price adjustments and the expectations of a low impact on some food prices, as a result of Romania's joining the Common Agricultural Policy and the enforcement of the EU Common Customs Tariff starting with 1 January 2007, but the persistence of excess demand against the background of high growth rates of investment and consumption, also supported by budgetary and income policies, calls for the maintenance of restrictive monetary conditions in order to ensure sustainable disinflation over the medium term.
In light of available data, the NBR Board has decided to maintain the monetary policy rate at 8.75 percent per annum and to pursue control over liquidity in order to ensure monetary conditions consistent with the achievement of the medium-term disinflation objectives.
The NBR Board is reiterating that it will continue to monitor economic, monetary and fiscal trends, standing ready to adjust its instrument settings in order to ensure the achievement of medium-term disinflation objectives in line with the announced inflation targets, i.e. 4.0 percent +/-1 percentage point for 2007 and 3.8 percent +/-1 percentage point for 2008.
According to the announced calendar, the next NBR Board meeting dedicated to monetary policy is scheduled for 9 February 2007, when a new quarterly Inflation Report is to be examined.