May 5 (SeeNews) - Romania's central bank, BNR, maintained on Thursday 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 12% respectively, the central bank said in a statement.
BNR also said it would 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 a 10-month high of 3.0% in March from 2.7% in February.
"The central bank is vigilant and ready to use all policy instruments at the proper time," governor Mugur Isarescu said in a press release later on Thursday.
Commenting on the central bank's decision, Erste Bank analysts said it suggests a potential narrowing of the symmetrical corridor of interest rates for the BNR’s deposit facility and lending facility in the next months.
"Key rate could be kept unchanged at 1.75% throughout 2016 and raised to 2% in the first quarter of 2017 due to fiscal risks and higher inflation," Erste analysts said.
For their part, ING Bank analysts commented that market expectations for further European Central Bank easing by September are likely to make BNR delay its first policy action until its meeting on November 4.
ING recently revised down its projections for Romania's inflation for end-2016 and end-2017 from 1.3% and 3.5% to 0.0% and 2.7%, respectively.
"Materialization of our forecast would allow the BNR to avoid negative real interest rates by gradually narrowing the corridor and tightening the liquidity control, implicitly avoiding credibility costs, before the first key rate hike expected by us in the second quarter of 2017," the ING analysts added.
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