Romania cuts policy rate to 5¾% as inflation dips, uncertainty lingers

By Susanna Moon

Chicago, Jan. 5 - The National Bank of Romania's board opted to lower its monetary policy rate again by 25 basis points to 5¾% at its meeting on Thursday. The bank cut the rate by 25 bps to 6% in November.

The annual inflation rate dipped to 3.44% in November amid "favorable trends in volatile prices, the fading-out of the first-round effect of the VAT rate hike and the ongoing prudent monetary policy stance," according to a bank new release.

The country's economy is continuing to recover, but growth worldwide is more uncertain, the bank noted.

In December the annual inflation rate was near the mid-point of the variation band around the 3% target, in line with the bank's latest forecast.

The bank said its recent assessments confirm the prospects of a slowdown in both headline and core inflation rates along with lower inflation expectations in the coming months.

As a result of the rate cut, beginning Friday, the annual interest rate on the deposit facility will be cut to 1.75% from 2% and the Lombard rate will be 9.75%, down from 10%.

When announcing the rate cut in November, the bank said the annual inflation rate dropped to 3.45% in September from 4.25% the previous month and that the rate re-entered the variation band around the central target after more than 12 months.

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