In its meeting of 28 March 2013, the Board of the National Bank of Romania decided the following:
- to keep the monetary policy rate unchanged at 5.25 percent per annum;
- to ensure adequate liquidity management in the banking system; and
- to maintain the existing levels of minimum reserve requirement ratios on both leu and foreign currency-denominated liabilities of credit institutions.
The NBR will closely monitor domestic and global economic developments so as, via an adequate use of its instruments, to ensure the fulfilment of its objectives to achieve price stability over the medium term and to maintain financial stability.
The analysis of the latest developments in macroeconomic indicators points to the resumption of disinflation, after the temporary pick-up in consumer price growth in January 2013, and to a relative improvement in economic activity, underpinned by favourable net export performance.
The annual inflation rate fell to 5.65 percent in February 2013 from the previous month’s reading of 5.97 percent, although remaining outside the variation band around the target and above the 4.95 percent level seen in December 2012. The annual adjusted CORE2 inflation rate 1 stood at 3.1 percent in February, marginally below the 3.2 percent figure in January 2013.
Real GDP recorded positive growth in 2012 Q4, while the widening of the negative output gap slowed. Monetary indicators point to the real annual dynamics of lending to the private sector remaining in negative territory, similarly to credit developments in the euro area and in most countries in the region.
The monetary policy remained prudent, seeking to firmly anchor inflation expectations amid the transitory inflation bout and the heightened capital flow volatility, triggered by resurgent eurozone tensions stymieing investors’ risk appetite.
As domestic political and financial tensions eased, the NBR carefully calibrated the monetary policy instruments, also by shifting from firm to adequate liquidity management, which led to an improvement of liquidity conditions on the money market and hence drove interbank rates considerably lower.
With interbank rates nearing the policy rate, the transmission of the latter’s signal is strengthened, which reflects positively upon the leu-denominated credit market, via a gradual cut in funding costs for both the real economy and the government sector.
The NBR’s current assessments reconfirm the prospects for the annual inflation rate to follow a downward trend, albeit remaining outside the variation band in the forthcoming months, with the persistence of the negative output gap being the main disinflation driver. Subsequently, the annual inflation rate is projected to reach the upward bound of the target band at end-2013.
In this context and with a view to effectively anchoring inflation expectations, the NBR Board has decided to keep the monetary policy rate unchanged at 5.25 percent per annum, to further ensure adequate liquidity management in the banking system and to maintain the existing levels of minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions.
The monetary policy stance aims to fulfil the objectives of price stability over the medium term and financial stability, while also mitigating the adverse impact of external and domestic factors on the economic rebound.
The NBR Board reiterates that the central bank closely monitors domestic and global economic developments so as, by gradually adjusting the monetary policy and adequately using its instruments, to ensure price stability over the medium term and financial stability, thus paving the way for lasting and sustainable growth.
In line with the announced calendar, the next NBR Board meeting dedicated to monetary policy issues is scheduled for 2 May 2013, when the new quarterly Inflation Report is to be examined.
1Calculated by excluding administered prices, volatile prices, as well as tobacco and alcohol prices from the consumer price index.
» Video: Press briefing, 28 March 2013 (Romanian only)