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Romania’s Ctrl Bk To Gradually Ease Monetary Policy After Applying IMF-Agreed Measures

The inflation increase and the economic slowdown triggered by lower exports and reduced external financing ask for a prudent view on the monetary policy that will ease gradually together with the implementation of the policy mix agreed with the International Monetary Fund, the central bank said.
Romania's Ctrl Bk To Gradually Ease Monetary Policy After Applying IMF-Agreed Measures
31 mart. 2009, 19:35, English

“The BNR Board believes that the implementation of the balanced macroeconomic policy mix agreed under the precautionary external financing arrangement will allow a gradual and prudent adjustment of the monetary policy in line with the resumption of the disinflation process and with the consolidation of financial stability,” a central bank statement said Tuesday.

BNR’s Board decided Tuesday to cut to zero from 40% at present the minimum reserve ratio on foreign-denominated liabilities with residual maturities of over two years. However, the central bank kept unchanged the key monetary policy rate at 10% on the year, and left unchanged the current minimum reserve requirements ratios on leu-denominated liabilities at 18%, as well as on foreign-currency denominated liabilities with residual maturities of up to two years, at 40%.

The analysis of the most recent statistics shows an increase in the annual inflation rate and a slowdown of economic growth as a result of lower exports and external financing against the background of deepening world economic and financial crisis, BNR’s statement reads.

The above factors reveal the need to maintain a prudent monetary policy stance given the need to continue the adjustment of the external deficit towards sustainable levels on the medium term and in a bid to avoid excessive exchange rate volatility, according to the central bank.

In Tuesday’s meeting, BNR’s Board also approved the letter of intent sent to the IMF regarding the external financing arrangement with international financial institutions and the European Union.

Romania agreed with the IMF, the E.U. and other financial institutions a EUR20 billion program to support the country’s external and internal deficit. The first instalments of the loan are expected in May.