Romania cuts policy rate by 25 bps to 6% as inflation outlook better

By Susanna Moon

Chicago, Nov. 3 - The National Bank of Romania's board decided to lower its monetary policy rate by 25 basis points to 6% at its meeting on Wednesday.

The annual inflation rate dropped to 3.45% in September from 4.25% the previous month and re-entered the variation band around the central target after more than 12 months, according to a bank press release.

The rate drop was attributed to the fall in volatile food prices over June to September and the fading out of most of the first-round effect of the VAT rate hike, the release noted.

The short-term inflation outlook also saw sharp improvement, in line with the bank's expectations regarding the end of the cycle of supply-side shock effects, the board noted.

The balance of medium-term risks remains "asymmetric," however, as they relate to outside factors, investors' risk aversion and capital flow volatility, as well as the fiscal policy stance and administered price adjustments, the bank said.

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