The NBR Board decided to cut the policy rate by half of a percentage point to 17.75 percent
22.11.2004
During its meeting on 18 November 2004, the NBR Board reviewed the latest developments in all macroeconomic indicators and the prospects for the period ahead.
In this context, the decision to pursue a policy stance favouring a more flexible ROL exchange rate was seen as the main contributor to an upsurge in volumes traded on the forex market and much larger swings of the ROL rate.
Board members have conceded that as a result of Romania's rating being upgraded to investment grade foreign direct investment and portfolio investments will increase, thereby leading to a sharper appreciation trend of the domestic currency amid further market-induced swings in the ROL exchange rate. This pinpoints a continued tightening of monetary policy, which helps disinflation to carry on.
The 12-month consumer price index dropped to 10.8 percent in October 2004 and is seen falling at a faster rate in the final two months of the year. In order for the disinflation trend to be validated, the NBR Board decided to cut the policy rate by half of a percentage point to 17.75 percent.
Taking into account the upward trend in aggregate demand for the period ahead and the adjustment of some administered prices in early 2005, the NBR Board decided to retain the cautious monetary policy stance in order to meet the inflation target, even in the long run.