In its meeting of September 26, 2007, the Board of the National Bank of Romania has decided the following:
- To keep unchanged the monetary policy rate at 7.0 percent per annum;
- To pursue a firm control of liquidity via open-market operations, seeking to enhance the signalling role of the monetary policy rate and reduce the volatility of interbank money market rates;
- To leave unchanged the existing minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions.
The NBR will vigilantly monitor developments in macroeconomic indicators and their outlook, both domestically and internationally, standing ready to adjust its instrument settings in order to achieve medium-term disinflation objectives in a sustainable manner and consolidate the convergence process with the European Union.
The analysis of recent trends in macroeconomic indicators reveals a slowdown of the disinflation process and of the economic growth mainly due to supply-side factors (the impact of a prolonged drought on the farming sector) but also attributable to persistent domestic demand pressures. These pressures are also highlighted by the widening external imbalance.
Year-on-year inflation climbed to 4.96 percent in August, close to the upper limit of this year's target band, due to a significant increase of food prices and a correction of the leu's exchange rate against the background of recent turbulences on the world financial markets.
Wage dynamics stayed above productivity growth, emphasizing the risks of deteriorating external competitiveness and of labour cost-related inflationary pressures.
In the monetary area, a revival of non-government credit dynamics is notable mainly due to the faster pace of foreign currency lending growth (foreign currency-denominated loans accounted for 50.6 percent of end-August overall non-government credit).
In light of the available data, the NBR Board has decided to keep unchanged the monetary policy rate at 7.0 percent per annum and to pursue a firm control of liquidity via open-market operations, seeking to enhance the signalling role of the monetary policy rate and reduce the volatility of interbank money market rates.
The NBR Board has also decided to leave unchanged the existing minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions.
The short-term inflation outlook has worsened due to a prolonged impact of drought on food prices and uncertainties related to the evolution of leu's exchange rate given the difficulty of assessing the duration and the effects of the recent world financial markets turbulences.
The NBR Board believes that achieving a sustainable disinflation and anchoring medium-term expectations require the maintenance of a cautious monetary policy stance as well as a strong support from the wage and fiscal components of the macroeconomic policy mix.
The NBR will vigilantly monitor developments in macroeconomic indicators and their outlook, both domestically and internationally, standing ready to adjust its instrument settings in order to achieve medium-term disinflation objectives in a sustainable manner and consolidate the convergence process with the European Union.
According to the announced calendar, the next NBR Board meeting dedicated to monetary policy is scheduled for