Key interest rate – Romania's central bank raises key interest 0.25 percentage points to 9.75%

The National Bank of Romania (BNR) raised today the monetary policy interest by 0.25 percentage points to 9.75 percent beating estimates, and maintained the current level of the mandatory minimum reserves, a release reads.

Most analysts interviewed by NewsIn estimated BNR would not raise the key interest because such an increment would have taken effect in several quarters, lacking the force to immediately influence inflation.

Nevertheless, some analysts foresaw the increase and said it would be a signal in the background of deeper inflation worries. Therefore, postponing the price hikes for gas and electricity from April to July could fuel inflation in the coming period, analysts said.

The central bank announced today it will continue to firmly manage liquidity on the monetary market through sterilizing the excess on the interbank market in order to keep interest close to the level of the monetary policy interest rate.

BNR raises interest the fifth time in six months to a new two year and eight month maximum

The raise today is the fifth in the past six months. BNR raised the key interest 2.75 percentage points against October 2007.

In the background of a constant process of disinflation, the central bank had trimmed the key interest for two years. It started with a spectacular 4 percentage points cut in August 2005 (from 12.5 percent to 8.5 percent) and it finally brought it down to 7 percent in June 2007.

Once the inflation burst in the second half of last year in the background of the severe drought which upped food-stuff prices and decreased the leu, the central bank started to harshen to monetary policy. Its first move was on October 31, 2007 when it raised the key interest to 7.5 percent.

Two other consecutive increases – in January and February – brought the monetary policy interest to 9 percent per year while the annual inflation reached 7.97 percent in February from less than 4 percent in spring last year.

Once more, BNR raised the key interest to 9.5 percent on March 26 while inflation reached 8.63 percent.

NewsIn