In its meeting of September 29, 2009, the Board of the National Bank of Romania decided the following:
- to lower the monetary policy rate to 8.0 percent per annum from 8.5 percent starting with September 30, 2009;
- to ensure an adequate management of liquidity in the banking sector in order to consolidate monetary policy transmission channels;
- to maintain the existing level of minimum reserve requirement ratios on both leu-denominated and foreign currency-denominated liabilities of credit institutions.
The NBR will continue to closely monitor domestic and global economic developments so as, by using 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 the latest statistical data highlights the consolidation of disinflation, with annual inflation rate falling to 4.96 percent in August from 5.06 percent in the previous month amid a sharp contraction in aggregate demand and moderate fluctuations of the leu exchange rate.
The adjusted annual CORE2 inflation – calculated by excluding the impact of administered and volatile prices (vegetables, fruit, eggs and fuel) as well as of the prices of major items liable to excise duties, i.e. tobacco and alcohol – dropped to an annual rate of 4.5 percent in August from 4.6 percent a month before.
Statistical data show a significant and persistent correction of the external deficit in the context of the fallout from the international economic and financial crisis. In the monetary area the following issues are worth to be noting: the still fast annual dynamics of government credit, the first positive monthly dynamic of credit to the private sector recorded over the last six months and a continuing trend of higher saving in the domestic economy.
The monetary policy stance stayed prudent, with the NBR permanently calibrating its broad monetary conditions with a view to consolidating the convergence of inflation rate towards medium-term objectives and ensuring the conditions for a sustainable revival of lending activity.
Interbank money market rates remained close to the monetary policy rate level. Meanwhile, the credit institutions’ deposit and lending rates for non-bank customers fell further, with the latter posting a relatively slower decline.
In light of the available data and of the assessment of recent and upcoming developments, the NBR Board has decided to lower the monetary policy rate to 8.0 percent per annum from 8.5 percent. Consequently, starting September 30, 2009, the rate on the deposit facility will be lowered to 4.0 percent per annum from 4.5 percent and the rate on the lending facility (Lombard) will be 12.0 percent per annum versus 12.5 percent. At the same time, the penalty rate for deficits of leu-denominated minimum reserve requirements will drop to 18.0 percent from 18.75 percent, starting with the October 24-November 23, 2009 maintenance period.
The NBR Board also decided to ensure an adequate management of liquidity in the banking sector with a view to consolidating monetary policy transmission channels and to further correlating market interest rates with the monetary policy rate, as well as to maintain the existing level of minimum reserve requirement ratios on both leu-denominated and foreign currency-denominated liabilities of credit institutions.
The NBR Board reaffirms that a firm and consistent implementation of the macroeconomic policy mix – monetary, fiscal and income- as well as of the structural reforms agreed under the multilateral external financing arrangement with the European Union, the International Monetary Fund and other international financial institutions is essential for achieving a further sustainable disinflation, maintaining financial stability and for a lasting and sustainable relaunch of economic activity.
The NBR Board reiterates that the central bank will continue to closely monitor domestic and global economic developments so as, by using 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.
In line with the announced calendar, the next NBR Board meeting dedicated to monetary policy issues is scheduled for November 3, 2009, when a new quarterly Inflation Report is to be analyzed.