The yesterday’s decision, to cut the required reserve ratio for liabilities in leu currency held by the banks from 20% to 18%, is effective from November 24 – December 23 2008.

BNR has not enforced a similar decision since July 8, 2005, when it decided to cut the required reserve ratio for liabilities in lei with falling due less than two years, from 18% to 16%.

In June 2006, National Bank of Romania raised the level of reserves for liabilities in lei, to 20% from 16%. However, required reserve ratio for liabilities in foreign currency was modified by National Bank of Romania in March 2006 when it climbed from 35% to 40%.

For liabilities in foreign currency, the banking regulator decided in the Thursday’s session, October 30, 2008 to keep the benchmark threshold of required reserve ratio, at 40%.

As for benchmark lending rate, NBR board decided to keep it at 10.25% per year for the second successive month. In October 2007-August 2007, NBR raise the lending rate seven times in a row, adding 3.25% in this interval.

Analysts expected the national regulator to maintain the benchmark lending rate at 10.25% per year, but they did not exclude any possible raise, as a signal to mounting inflationary pressures, caused by the decisions to lift salaries and pensions.

As for minimum reserves for liabilities in lei, analysts said S&P’s decision to cut the country rating reduced the odds that central bank would keep the rate.

BNR continues to manage liquidity in “an effort to provide a proper functioning of the inter-bank market” reads the press release issued by the institution.

In Thursday’s session, BNR board analyzed and approved the new quarterly Report on inflation, which will be presented at a media briefing on November 3 and “assesses the recent macroeconomic context, analyzes outlooks on inflation and scans the prime challenges and constraints that the monetary policy is likely to experience in the forthcoming period”.

The decision to cut the required reserve ratio for liabilities in lei pledges for improvement of liquidity management in the interbank market, in case of worse effects of financial crisis, to ensure a sustainable financing of the economy, NBR announced.

“The inflation target for 2008 is set at 3.8% with a tolerance band of +/-1%, and for 2009 is set at 3.5% within the same variation band.

BNR stressed that the disinflation process, wherein the annual inflation rate decreased to 7.3% in September 2008, from a 9.04% high registered in July, will continue, and the economic growth will be maintained at a high level, “supported both by investments’ expansion and by the growth of consumption”. In first half this year, Romania’s economy advanced at a record pace of 8.8%.

Translated by Camelia Oancea