Romania: Central Bank holds rates unchanged at its last 2018 meeting
At its last monetary policy meeting of the year, held on 6 November, the National Bank of Romania (NBR) kept the policy rate unchanged at 2.50%. Moreover, the Bank left the deposit facility rate unchanged at 1.50% and the lending facility (Lombard) rate at 3.50%. Meanwhile, the reserve requirement on both leu- and foreign-currency denominated liabilities was left unaltered.
A marginal moderation in both headline and core inflation and softer growth supported the NBR’s decision. Headline inflation inched down to 5.0% in September from August’s 5.1%, although remained well above the upper band of the Bank’s target range of 1.5%–3.5%, where it has been for nine consecutive months. Core inflation also eased slightly, mainly influenced by softer growth in international agri-food prices. Meanwhile, revised national accounts for the second quarter confirmed the economy shifted into a lower gear this year, due to cooling external and domestic demand—except for inventories, which supported growth. July–August figures on construction production and retail sales suggest that economic activity slowed further in Q3. As domestic demand cooled, the Bank expects more moderate inflationary pressures going forward.
The NBR expects inflation to decline to near the upper band of the range by the end of the year, before dropping further and remaining within the upper bound of the target in 2019. The Bank stated that risks to the outlook stem mainly from international fuel prices, administered prices at home, future wage dynamics and the fiscal stance pursued by the government. In its communiqué, the NBR noted that it will aim to secure price stability in the medium-term, which it sees as a condition for sustainable economic growth, and once more called for structural reforms to strengthen the country’s productive capacity.
The next monetary policy meeting is scheduled for 8 January 2019.