BUCHAREST (Romania), October 5 (SeeNews) – Romania’s central bank announced on Tuesday that it would raise its key monetary policy rate from 1.25% on October 6 to 1.50% – the first rate hike since May 2018.
The central bank BNR has also decided to raise the interest rate on the deposit facility to 1% per annum and the interest rate on the credit facility to 2%, it said in a statement after a board meeting on monetary policy.
The BNR also decided to maintain the existing reserve requirements for both leu and foreign currency bank liabilities.
The current assessments of the central bank indicate that the annual inflation rate will rise in the short term to significantly higher values than previously expected under the influence of supply-side shocks.
The main reason for the increase is the expected renewed sharp rises in energy prices, especially of natural gas, due to the rise in domestic and European wholesale prices and, to a lesser extent, fuel prices, especially due to the non-petrol price of the diesel component, stated the central bank.
In addition, the fourth wave of pandemics and the associated restrictions in view of the rapid deterioration in the health situation and the very low vaccination rate in Germany, at least in the short term, harbor heightened uncertainties and risks for the forecasts. From BNR’s point of view, these developments also have a potentially negative impact on the labor market, which has obviously improved until recently.
The next monetary policy meeting of the Central Bank Council is scheduled for November 9th.
The decision of the BNR came shortly after the liberal government under Prime Minister Florin Citu lost a vote of no confidence in parliament requested by the opposition left Social Democratic Party (PSD).
(1 euro = 4.9485 lei)