Romania's c-bank holds key rate at 2.50%

Romania's c-bank holds key rate at 2.50% Romania's central bank - BNR

BUCHAREST (Romania), July 4 (SeeNews) - Romania's central bank said on Wednesday it will keep its monetary policy rate at 2.50%.

The central bank, BNR, also decided to leave unchanged the deposit facility rate at 1.50% per annum and the lending facility rate at 3.50% per annum, it said in a statement after a board meeting on monetary policy.

BNR also decided to maintain the existing levels of minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of banks.

On May 7, BNR increased its monetary policy rate to 2.50% from 2.25% - the third rate hike this year.

Romania's annual consumer price inflation quickened to 5.4% in May from 5.2% in April, continuing a five-year high run. On May 9, BNR increased its annual inflation forecast for this year to 3.6% from 3.5%, outside of its target band of 1.5-3.5%.

Ahead of the monetary policy meeting, analysts had mixed opinions about the likelihood of a rate hike.

"Although annual inflation is likely to peak in June at around 5.6% and follow a downtrend in the last quarter of the year, it is unlikely to return within the 1.5-3.5% targeted range by the end of 2018," UniCredit Bank analysts said on Monday in a weekly note on Romania's economy.

 At the same time, the market is asking for higher interest rates, UniCredit noted, adding that the situation is aggravated by the current risk-off environment that has affected Central and Eastern Europe (CEE).

"Consequently, we expect the central bank to hike in order to reduce the pressure on the Romanian leu and on interest rates," it added.

ING analysts said that BNR is likely to keep the rate unchanged, pointing to the need to assess the outlook better after more than 200 basis points in the tightening of lending rates in less than one year.

"Nevertheless, with money market rates much higher than the key rate and with the Romanian leu under weakening pressure, we see a material chance of around 30% of a 25bp hike," ING Bank analysts said in a daily market analysis on Romania on Monday.

(1 euro=4.6617 lei)

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