January 10 (SeeNews) - Romania's central bank said on Tuesday it will increase its monetary policy rate to 7.00% from 6.75% as of January 11.
The central bank, BNR, also decided to increase the deposit facility rate to 6.00% per year from 5.75%, as well as the lending facility rate to 8.00% from 7.75%, it said in a statement after a board meeting on monetary policy. The existing ratios of minimum reserve requirements for both leu-and foreign currency-denominated liabilities of banks will remain unchanged.
The decision aims to anchor inflation expectations over the medium term, as well as to foster saving through higher bank rates, so as to bring the annual inflation rate back in line with the 2.5 percent ±1 percentage point flat target on a lasting basis, in a manner conducive to achieving sustainable economic growth, the BNR said. Romania's consumer prices rose 16.76% on the year in November, following an annual increase of 15.32% in October, the statistics office said earlier.
According to current assessments, the annual inflation rate will probably decline in the first quarter of 2023, in line with BNR's latest medium-term forecast, but will fall at a significantly faster pace afterwards, to reach one-digit levels in the third quarter of this year due to the extension of energy price capping and compensation schemes until end-March 2025, the BNR added.
The escalation of the war in Ukraine and the related increasingly harsh sanctions generate, however, considerable uncertainties and risks to the outlook for economic activity, hence to medium-term inflation developments, through the possibly stronger effects exerted on consumer purchasing power and confidence, as well as on firms’ activity, profits and investment plans, the bank said. The war might also affect more severely the European and global economy and the risk perception towards economies in the region, with an unfavourable impact on financing costs.
The central bank's next monetary policy meeting will take place on February 9.
(1 euro= 4.9253 lei)