Romania National Bank Keeps Monetary Policy Rate at 7%

Romania’s National Bank decided to keep the monetary policy rate at 7%. The decision comes as the board notices the annual inflation rate went down in June to 10.25 percent – in line with forecasts –, from 10.64 percent in May, amid the faster annual decline in fuel prices and the slower growth in processed food prices.

The new statistical data reconfirm the slowdown in economic growth in 2023 Q1 to 0.2 percent from 1.0 percent in the previous three months (quarterly change), which implies a relatively pronounced narrowing of excess aggregate demand over this period. At the same time, in 2023 Q1, the annual growth rate of GDP shrank significantly to 2.4 percent from 4.5 percent in 2022 Q4.

The Romanian currency posted a strengthening trend vis-à-vis the euro for most of July, among other things, under the influence of one-off or seasonal domestic factors, after softening mildly in the prior two months. Against the US dollar, the leu recorded a notable appreciation due to the significant weakening of the American currency on global financial markets in the first half of the period.

In the meeting held today, 7 August 2023, based on the currently available data and assessments and in light of the very elevated uncertainty, the NBR Board decided to keep the monetary policy rate at 7.00 percent per annum. Moreover, it decided to leave the lending (Lombard) facility rate unchanged at 8.00 percent per annum and the deposit facility rate at 6.00 percent per annum. Furthermore, the NBR Board decided to keep the existing minimum reserve requirement ratios on credit institutions’ leu- and foreign currency-denominated liabilities. The NBR Board decisions aim to bring the annual inflation rate back in line with the 2.5 percent ±1 percentage point flat target on a lasting basis, among other things, by anchoring inflation expectations over the medium term in a manner conducive to achieving sustainable economic growth. At the current juncture, the balanced macroeconomic policy mix and the implementation of structural reforms, also by using EU funds to foster the growth potential over the long term, are of the essence in preserving a stable macroeconomic framework and strengthening the capacity of the Romanian economy to withstand adverse developments.

NBR board meeting in August 7

The next meeting on monetary policy will be held on October 5.