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Romanian Central Bank Cuts Key Rate By 50 Bps To 8% – 2

Romania’s central bank Tuesday cut its monetary policy interest rate by 50 basis points to 8% on the year, in line with market expectations, while keeping the minimum reserve requirements unchanged.
Romanian Central Bank Cuts Key Rate By 50 Bps To 8% - 2
29 sept. 2009, 12:20, English

This was the fifth rate cut this year, from 10.25% in January, in an effort to support the ailing economy. Romania’s gross domestic product fell 7.6% on the year in the first half and the most recent forecasts point to a economic contraction of 8%-8.5% for the whole of 2009.

The minimum reserve requirements ratios were kept unchanged at 30% for foreign currency-denominated liabilities, and at 15% for Romanian leu-denominated liabilities.

On Tuesday, the central bank’s Board also decided to actively use open-market operations in order to ensure an adequate management of liquidity in the banking system.

All five analysts polled by MEDIAFAX last week estimated a 50 bps rate cut, as reduced inflation in the past months left room for a further lowering of the credit cost.

Romanian consumer prices fell 0.19% on the month in August, after a 0.07% decline in July, while the annual inflation narrowed for the sixth consecutive month to 4.96%, the lowest level in two years.

The central bank set a 3.5% inflation target for 2009, with one percentage point variation band. In August, the bank estimated the annual inflation will be at 4.3% in December.