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August 14, 2022
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Economy Romanian News

Romania’s National Bank Increases Monetary Policy Rate to 3.75pc following Double-Digit Inflation

In the meeting held on May 10, 2022, based on the currently available data and assessments, as well as in light of the extremely elevated uncertainty, the National Bank of Romania – NBR Board decided to increase the monetary policy rate to 3.75 percent per annum from 3.00 percent per annum as of 11 May 2022. Moreover, it decided to raise the lending (Lombard) facility rate to 4.75 percent per annum from 4.00 percent per annum and the deposit facility rate to 2.75 percent per annum from 2.00 percent per annum to maintain firm control over money market liquidity. Furthermore, the NBR Board decided to keep the existing minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions.

This decision aims at tackling galloping inflation in Romania, which has already reached two digits. The experts even wait for the worse to come in the following months.

According to the NBR report, the updated forecast shows a renewed considerable worsening of the inflation outlook, as the projected path of its annual dynamics has seen an additional significant upward revision across the entire horizon, under the strong impact of global supply-side shocks, compounded and protracted by the war in Ukraine and by the sanctions imposed on Russia.

The same report mentions that the annual inflation rate is expected to accelerate its growth in 2022 Q2 and decline only gradually in the next four quarters, but more steeply thereafter, due to sizeable base effects and amid aggregate demand surplus narrowing to almost zero. As a result, the inflation dynamics will probably climb considerably above the previously-forecasted levels. They will fall to one-digit levels no sooner than 2023 H2, remaining above the variation band of the target at the end of the projection horizon.

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