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Romanian Ctrl Bk Raises Key Rate By 50 Bps % To 7.5%

The Romanian central bank Wednesday raised its key monetary policy rate by 50 basis points to 7.5% from 7%, the bank said in a statement.
Romanian Ctrl Bk Raises Key Rate By 50 Bps % To 7.5%
31 oct. 2007, 20:11, English

The bank will continue controlling the money market liquidity to bring annual inflation down, which is likely to exceed the targeted range of 3% – 5% for 2007, it said.

In September, Romania’s monthly inflation accelerated 1.08% and boosted the year-on-year inflation rate to 6.03% from 4.96% in August, on drought-induced rise in food prices and the Romanian leu which weakened due to the global subprime mortgage crisis and negative data on the country’s outlook.

“The persistence of negative supply-side effects, high household income dynamics, the projected rise in public spending towards year-end as well as uncertainties over leu exchange rate movements signal that end-2007 inflation will exceed the upper limit of the 3-5 percent target band,” it said.

The bank also warned against “risks of a prolonged deviation of inflation from the target through part of 2008” and said the monetary policy “should ensure a firm and sustainable anchoring of inflation expectations at the low levels achieved by now.”

The bank also decided to keep restrictive measures in place and hold the minimum reserve requirement ratios on both leu and foreign currency denominated liabilities of credit institutions at current levels.