Romanian central bank raises key rate to 1.5% amid rising inflation and uncertainty
BUCHAREST (Romania), Oct.5 (SeeNews) – Romania’s central bank said on Tuesday it would raise its key rate to 1.50%, from 1.25% on October 6 – the first rate hike since May 2018.
The central bank, the BNR, has also decided to raise the rate of the deposit facility to 1% per annum and the rate of the loan facility to 2%, she said in a statement after ” a meeting of the board of directors on monetary policy.
The BNR has also decided to maintain the existing minimum reserve ratios for banks’ liabilities in leu and foreign currencies.
Current assessments by the central bank indicate that the annual inflation rate will increase in the short term to significantly higher values than previously anticipated, driven by supply side shocks.
The determining factors of the increase are the further significant increases expected in energy prices, in particular natural gas, due to the surge in national and European wholesale prices and, to a lesser extent, fuel prices, mainly due to the diesel component, the central bank noted.
In addition, the fourth pandemic wave and the associated restrictions pose uncertainties and increased risks to the forecasts, at least in the short term, given the rapidly worsening health situation and the very low level of immunization in terms of interior. In the opinion of the BNR, these developments also have a potential negative impact on the development of the labor market, which was clearly improving until recently.
The next monetary policy meeting of the central bank’s board is scheduled for November 9.
The BNR’s decision came shortly after the Liberal government led by Prime Minister Florin Citu lost a vote of no confidence in the parliament demanded by the opposition Social Democratic Party (PSD).
(1 euro = 4.9485 lei)