Romanian Central Bank Raises Key Interest to 8%

Romanian Central Bank Raises Key Interest to 8%

The National Bank of Romania (BNR) increased the monetary policy interest rate from 7.5 per cent to 8 per cent, said the bank in a press release. This shows that there is a high dynamics of the domestic demand, and consumption remains at an unsustainable level, in the conditions of the intensification of the growth rate of the credit, Nine o' Clock reports.

Thus a new signal is issued for more expensive credits, because the central bank leaves less RON available on the market. And the banks are obliged to give fewer loans to the population.

BNR is worried about the spectacular growth of the consumer credits which have a negative impact on inflation. This indicator was affected also by the growth rate of the salaries, which has exceeded labour productivity.

The main goal of the decision to increase the monetary policy interest rate is to reduce inflation on a downward trend.

BNR recalls that the annual inflation rate was 6.67 per cent last November, remaining over the upper limit of the variation interval around the target, as the effect of the marked increase of the prices of food products and of the tariffs for the services indexed at the exchange rate of the RON. 
Maintaining the inflation targets agreed together with the Government, of 3.8 per cent for 2008 and 3.5 per cent for 2009, with a variation interval of plus/minus one percentage point, and the enforcement of a restrictive mix of economic policies will determine the efficient anchoring of the anticipations of the business operators and of the population in the context of the uncertainties which affect the international economic circles, reads the press release.
The Board of Administration (CA) of BNR decided in the first monetary policy meeting of this year also to maintain the current level of the rates of the minimum compulsory reserves applicable to the liabilities in RON and foreign currency of the credit institutions, added the press release of the central bank.

BNR also announced the continuation of the firm management of the liquidity on the monetary market through the market operations. The next meeting of BNR Board dedicated to the monetary policy will take place on February 4, when the new quarterly report over inflation will be also analyzed and approved.

On the background of the decision to increase the interest rate, BNR attracted on Monday from the commercial banks RON 4.78 bln in deposits with maturity over two weeks, for which it paid an interest rate of 8 per cent per year. The central bank accepted the whole liquidity offered by the 14 credit institutions participant to the auction.

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