In its meeting of March 29, 2010, the Board of the National Bank of Romania has decided the following:
- to lower the monetary policy rate to 6.5 percent per annum from 7.0 percent starting from March 30, 2010;
- to pursue an adequate management of liquidity in the banking system;
- to leave unchanged the existing minimum reserve requirement ratios on both leu-denominated and foreign currency-denominated liabilities of credit institutions.
The NBR will continue to closely monitor domestic developments and the global economic evolutions so as to adequately adjust its instruments to ensure the achievement of its objectives related to both price stability and financial stability, while fulfilling the commitments under the agreements with the European Union, the International Monetary Fund and other international financial institutions.
The analysis of macroeconomic developments show the resumption of the disinflation process amid a drop in adjusted CORE 21 annual inflation rate and an appreciation of the leu, together with the existence of signs of recovery in some sectors, while for others uncertainties persist.
The annual inflation rate fell to 4.49 percent in February after it surged to 5.2 percent in January under the temporary impact of the exogenous shock of the adjustment of excise duties on tobacco.
Statistical data reveal a slightly slower decline in final private consumption, an improved export performance while the current account deficit has remained at sustainable levels. Meanwhile, the annual dynamics of credit to the private sector, especially of leu-denominated loans, have remained in negative territory.
A significant improvement of the liquidity in the banking sector is worth noting, while the average rates on banks' new deposits as well as lending rates on new loans, despite their downward adjustment, have remained relatively high in relation to the monetary policy rate.
The monetary policy stance stayed prudent seeking to ensure the convergence of inflation towards medium-term objectives as well as the normalization of money market and banking interest rates. This aims to consolidate favorable conditions for a sustainable revival of lending and the achievement of a solid economic recovery.
The outlook shows a continuation of disinflation as well as persistent uncertainties related to trends on the global economy, capital flows, administered prices as well as of some volatile prices. In this context, the NBR Board has decided to lower the monetary policy rate to 6.5 percent per annum from 7.0 percent. Consequently, starting March 30, 2010, the rate on the deposit facility will be cut to 2.5 percent per annum from 3.0 percent and the rate on the lending facility (Lombard) will be 10.5 percent per annum versus 11.0 percent. At the same time, the penalty rate for deficits of leu-denominated minimum reserve requirements will drop to 15.75 percent starting with the April 24-May 23, 2010 maintenance period.
The NBR Board has also decided to ensure an adequate management of liquidity in the banking system and to maintain the existing levels 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 developments and global economic evolutions so as to adequately adjust its instruments to ensure the achievement of its objectives related to both price stability and financial stability, in the context of achieving the commitments made under the agreements with the European Union, the International Monetary Fund and other international financial institutions.
In line with the announced calendar, the next NBR Board meeting dedicated to monetary policy issues is scheduled for May 4, 2010, when a new quarterly Inflation Report is to be examined.
1) The adjusted annual CORE2 inflation rate is calculated by excluding the administered and volatile prices (vegetables, fruit, eggs and fuel) as well as of prices of tobacco and alcohol from the headline consumer price index.