Romania Ctrl Bk To Keep Monetary Policy Decisions ‘Prudent’

„This combination of monetary policies seeks to continue with cautious, rather smaller steps, so we can see how the bank’s decisions are absorbed by the market and decide on the next step,” Isarescu told a news conference on inflation.

Isarescu said the central bank’s decision to keep the reserve requirements on leu-denominated liabilities unchanged was motivated by the liquidity surplus on the market.

„The liquidity surplus appeared overnight in January, following liquidity deficits registered in December. Such movements can be surprising and we can’t counter them. We can’t promise to counter each sentiment on the market,” Isarescu said.

He said the central bank pledges to manage liquidity in an „adequate” manner, a slight shift from a previous stance heralding a „firm” management of the liquidity.

„Unlike the previous stance, the adequate management of liquidity targets precisely this instability of the sentiment on foreign and implicitly on the local markets, which we cannot tackle by cutting the rate or by other (market) operations. It would mean that we will buy and sell on a daily basis, which is impossible,” Isarescu said.

He added the current interest rates are suitable for the existing economic and monetary conditions.

Romania’s central bank on Wednesday cut its key rate by 50 basis points to 7%, the lowest level in more than two years, but kept the minimum requirements on both foreign currency-denominated and leu-denominated liabilities unchanged at 25% and 15%, respectively.