Romania’s central bank said it will increase its monetary policy rate to 5.50% from 4.75% as of August 8, according to See News.
The central bank, BNR, also decided to increase the deposit facility rate to 4.50% per year from 3.75%, and the lending facility rate to 6.50% from 5.75%, it said in a statement on Friday after a board meeting on monetary policy.
The decision aims to anchor inflation expectations over the medium term, as well as to foster saving through higher bank rates, so as to bring back the annual inflation rate in line with the 2.5 percent ±1 percentage point flat target on a lasting basis, in a manner conducive to achieving sustainable economic growth, the bank said.
The existing ratios of minimum reserve requirements for both leu-and foreign currency-denominated liabilities of banks will remain unchanged.
Romania’s consumer prices rose by 15.05% year-on-year in June, compared to 14.49% in May, the latest data from the statistics office showed.
According to BNR, the updated forecast shows the prospects for the annual inflation rate to level off in the third quarter and gradually decline later on, yet on a path revised moderately upwards.
The prospects for the annual inflation rate to level off and decrease rely on a milder impact of global supply-side shocks in the context of energy price capping schemes implemented until March 2023. Also, inflation might decline due to a a sizeable disinflationary base effects, alongside influences from the likely rapid contraction and closing of the positive output gap in mid-2023, followed by the output gap widening into negative territory, the central bank explained.
Also, the war in Ukraine and the sanctions against Russia remain a major source of uncertainties and risks to the outlook for economic activity, the BNR said.
At the same time, the absorption of EU funds, especially those under the Next Generation EU programme, is conditional on fulfilling strict milestones and targets for implementing the approved projects. „It is vital to absorb and reap the full benefits of these funds,” the BNR stressed.
The central bank’s next monetary policy meeting will take place on October 5.