Adviser to the NBR governor sheds light on central bank's monetary policy actions

Ana Sabiescu, 6 Aug 2009

Romanian version

The National Bank of Romania lowered the monetary policy rate to 8.5% per annum, reduced the required reserve ratio for fx-denominated liabilities to 30%, and reduced the maturity of the auction-based repo operations to one week from one month. Lucian Croitoru, monetary policy adviser to the NBR governor, outlined to Wall-Street the reasons underlying NBR’s decisions in the yesterday’s rate-setting session and their possible effects.

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Lending rates likely to drop after the monetary policy rate cut

This was the second consecutive cut in benchmark interest rates operated by the Board of National Bank of Romania, from 9pp to 8.5pp. The measure could primarily result in further reductions of lending rates and deposit rates at banks.

“The interest rates needed to be slashed, with the economy in the grips of a process of disinflation”, said Lucian Croitoru.

The disinflationary trend and the depressed economy have forced the “invisible hand” of NBR before. This year only, the central bank has cut the interest rates by a total of 1.75pp.

The annual inflation rate stood at 5.86pp in June down 0.09pp from May after hitting a record 6.89 pp in February 2009. Thus, the real interest rate dropped to 2.64% per annum.

The new rate of 8.5pp is effective as of today.

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