Romania’s Ctrl Bk Ups Rates By 25 Bps To 10.25%

Since October 2007, the central bank has hiked interest rates by a total of 325 basis points in seven consecutive moves to 10.25% to counter inflationary pressures and booming demand.

Most of the analysts polled by Mediafax Monday had expected the bank to maintain unchanged the key rate but didn’t rule out a 25 basis points increase. 

In Thursday session, the bank also decided to leave unchanged the existing minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions.

Romanian inflation slowed to 0.28% on the month in June, due to a moderate increase in food and non-food prices, but annual inflation was 8.61% just below a two-year high of 8.63% in March.

Analysts see inflation peaking at around 9.5% in July and decelerate in the second part of the year.

Since adopting an inflation-targeting regime in August 2005, the central bank has reached its target only once, in 2006, when headline inflation stood at 4.87%, just below the 5% target.

In 2007, year-end inflation was 6.57%, almost two percentage points higher than its 3%-5% target. For 2008, the central bank expects to miss its target again, projecting year-end inflation at 6%.