Romania Ctrl Bk Cuts Key Rate By 50 BPs To 7%

The move was widely expected by analysts, who predicted the central bank would want to send a positive signal to the banking market and kick-start lending. Also, the monetary policy easing was anticipated on the backdrop of falling consumer prices.

Romania’s annual inflation rate fell to 4.7% in December last year from 6.3% at the end of 2008, but the central bank missed its inflation target for the third consecutive year. The bank targeted an inflation of 3.5% for 2009, with one percentage point variation band around the target.

A similar target was set for 2010. The central bank predicted the annual inflation will reach 2.6% end-December.

The rate cut is effective as of February 4, the central bank said in a statement. It said the reserve requirements on both foreign currency-denominated and leu-denominated liabilities were left unchanged at 25% and 15%, respectively.

This was the second rate cut in 2010. Early January, the central bank lowered its monetary policy rate to 7.5% from 8%. Last year, the key rate was cut in five steps, from 10.25%.