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Romania c-bank holds key rate at 1.75%

Romania c-bank holds key rate at 1.75% National Bank of Romania. Author: Gabriel. Licence: Creative Commons, Attribution.

BUCHAREST (Romania), January 6 (SeeNews) - Romania's central bank, BNR, maintained on Friday its monetary policy rate at a record low of 1.75%, in line with analysts' expectations.

BNR's board also decided to retain the minimum reserve requirement ratios on both leu and foreign currency-denominated deposits at 8% and 10% respectively, it said in a statement.

BNR noted it will pursue an adequate liquidity management in the banking system.

BNR last changed its monetary policy rate in May 2015, when it cut it by 25 basis points to 1.75%.

Romania's annual consumer price deflation deepened to 0.7% in November from 0.4% in October.

Commenting on BNR's decision, ING Bank analysts said that they were not expecting any change in the monetary policy stance. "While 2017 budget approval is still pending, likely significant stimulus vs 2016 might call for a slightly hawkish tone," ING Bank analysts said in a snap analysis.

The analysts also noted that while the previous two BNR decisions to leave the monetary policy stance unchanged have been adopted unanimously by the Board citing uncertainties, two-way inflation outlook risks, the minutes revealed a split among policymakers.

Some Board members are looking at the deposit facilities corridor as a policy option, with other members needing additional empirical evidence for the excess demand, they commented.

According to Raiffeisen analysts, BNR is likely to keep the key rate unchanged until November, when they expect a 25 basis points increase.

"Still, the monetary policy stance should become tighter earlier through the decline of excess liquidity from the money market on the back of positive issuance in government securities. Also, in anticipation of the key rate hike, an increase in the interest rate for BNR’s permanent deposit facility should not be ruled out later this year," Raiffeisen Bank analysts commented in a daily market report.

(1 euro = 4.5110 lei)

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