April 4 (SeeNews) - Romania’s central bank said on Thursday it decided to keep its monetary policy rate unchanged at 7% for the tenth consecutive time since January 2023.
The central bank, BNR, also left unchanged the lending facility rate and deposit facility rate at 8.00% and 6.00% per annum, respectively, it said in a statement following a board meeting on monetary policy.
The existing ratios of minimum reserve requirements for both Romanian leu- and foreign currency-denominated liabilities of banks will also remain unchanged.
The decisions aim to bring the annual inflation rate back in line with the 2.5% ±1 percentage point flat target on a lasting basis by anchoring inflation expectations over the medium term in a manner conducive to achieving sustainable economic growth, BNR said.
Romania's annual inflation rate rose in line with BNR forecasts to 7.41% in January 2024 from 6.61% a month earlier, before inching down to 7.23% in February. The increase against the end of 2023 was mainly driven by rising electricity prices under the impact of a base effect, as well as by higher fuel and tobacco prices spurred by hikes in excise duties and crude oil prices.
The BNR's current assessment sees inflation easing at a faster-than-anticipated pace, due to base effects, downward corrections of agri-food commodity prices coupled with decelerating growth in import prices and downward adjustments of short-term inflation expectations. According to the bank's February forecast, the annual inflation rate is seen to approach the upper bound of the variation band of the target by December 2024.
Uncertainties concerning the inflation outlook revolve around fiscal measures aimed at underpinning the budget consolidation process and the measure to cap markups on basic foods, extended until the end of 2024, as well as the evolution of oil prices.
The annual growth rate of Romania's gross domestic product (GDP) slowed down to 2.1% in 2023, from 4.1% in the previous year, the country's statistical board said in March, quoting provisional data. Divergent developments in aggregate demand components and major sectors are expected to lead to a drop in the annual growth rate of GDP during the first quarter of 2024, according to the BNR.
The BNR last changed its policy rate on January 11, 2023, increasing it from 6.75% to 7%. The central bank will hold its next monetary policy meeting on May 13.