Monetary policy interest-BNR continues anti-inflation fight, this being the 3rd such increase

Publish date: 05-02-2008
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The Central Bank of Romania (BNR) today increased to 9 percent the monetary policy interest, this being the third such move since October last year, when the monetary policy interest grew to 7.5 percent and January this year, when a 0.5 percentage points increase took place.

BNR's decision confirms the analysts' predictions, who spoke of a 0.5 to 1 percent increase. The central bank aims at a firmer management of the liquidity in the monetary market by adopting this move, a BNR release explains.

BNR also announced the increase of the risk provisions for foreign currency credits, the measure referring to the debtors who are exposed to foreign currency risks.

The central bank is currently trying to control inflation through a series of measures taken especially within the inter-banking market. Romania witnessed a 6.57 percent inflation rate at the end of 2007, thus exceeding the 4 percent target it wanted to reach.

 For the end of this year, BNR is aiming at a 3.8 percent inflation rate. After the 8 percent increase in January, the central bank voiced concerns over the level of consumption which stimulates inflation.

The present interest levels for the minimum mandatory reserves imposed on banks stand at 20 percent of banks' lei debts and 40 percent for hard-currency debts.

The central bank previously explained the overall demand level it is not backed by Romania's offer for goods and services. This has two main effects: it affects the external balance of payments and stimulates inflation, which widened over BNR's 4 percent target. BNR emphasized the main reason for the high consumption level resides in the increase of salaries, which exceeds labor productivity.


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