Romania’s Ctrl Bk Ups Main Rate To 8% From 7.5%

The bank revealed there is an increasing demand, in the context of unsustainable consumption level and a rapid expansion of lending to the private sector.

“The rise of the aggregate demand, boosted mainly by higher incomes and non-government credit dynamics, has been faster than the aggregate supply advance, causing the exogenous shocks to feed through into prices and making the external deficit to widen further,” the bank said in the statement.

In November, year-on-year inflation stood at 6.67%, remaining above the upper limit of the central bank target band of 3-5%, due to a steep increase in food prices and tariffs for services.

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“The short-term inflation outlook has worsened in the context of heightened macroeconomic risks, especially those related to the income policy and higher public spending in the run-up to forthcoming elections as well as uncertainties over investors’ appetite for emerging markets risk,” the bank said.

The central bank Board has also decided to continue to pursue a firm control of money market liquidity via open-market operations and leave unchanged the existing minimum reserve requirement ratios on both leu and foreign currency-denominated liabilities of credit companies.

The central bank maintained its 2008 and 2009 inflation targets at 2.8-4.8% and 2.5-4.5%, respectively.

The next NBR Board meeting dedicated to monetary policy is scheduled for February 4, 2008, when a new quarterly Inflation Report will be examined and approved.