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Central bank ups key interest rate to 9 pct

During its February 4 meeting, the Board of the National Bank of Romania (BNR) decided to increase the key interest rate from 8.0 pct to 9.0 pct per annum, concomitantly with the continuation of the firm management of liquidity on the money market through market operations.

At the same time, the Board decided to adopt supplementary prudential measures, inclusively by increasing collaterals for foreign currency loans intended for debtors exposed to the currency risk and by maintaining the current level of minimum mandatory reserves for the credit institutions' liabilities in local lei and foreign currency. The BNR Board analysed and approved the Quarterly Report on Inflation, a document that will be presented to the public on February 7, 2008, when the 12-month schedule of the next BNR Board meetings dedicated to the money policy will also be announced. 'The annual inflation rate was 6.57 percent at the end of 2007, as to 4.87 percent in December 2006, outside the 3-5 percent variation interval attached to the 4 percent target. The deviation was mainly due to exogenous shocks on the aggregate bid - the negative outcomes in the farming sector triggered by the severe drought, and the increase in global foodstuff and oil prices. The resulting inflationist pressure was amplified by persisting excess of aggregate demand, at a time of a strong increase in revenues and lending to the private sector,' reads the BNR Board release. 'The monetary policy, assessed through the aggregate monetary conditions, has further adjusted its restrictive effects by increasing the key interest rate, keeping firm control on liquidity on the money market and maintaining restrictions on the minimum mandatory reserves. The short-term outlook for inflation has worsened amid rising macroeconomic risks, related especially to growing revenues of the population and public spending in an electoral period, as well as uncertainties regarding the evolution of the leu's exchange rate against persisting economic international tension. BNR reiterates that it pursues the use of all instruments at its disposition so as to bring back, as fast as possible, disinflation to a sustainable medium-term track. At a time when BNR's main concern is that the companies' inflationist projections be efficiently anchored at low inflation levels, it is essential that the temporary placement of the forecast annual inflation rate outside the variation interval does not result in a relaxation of wage and fiscal policies. Getting inflation back to the announced downward trend, which is compatible with the accomplishment of medium-term disinflation goals and progress in the nominal and real convergence process, calls for tougher monetary policy and increased consistency in the entire set of economic policies. Under these circumstances and based on available data, the BNR Board has decided to adopt a package of measures aimed at strengthening the monetary policy,' reads the cited release. Sursa: http://www.rompress.ro

Tags: inflation bnr board interest

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