Thursday, January 20, 2022

Ukraine raises rate 6th time and ready to hike further

     Ukraine's central bank raised its main interest rate for the sixth time and said it "will continue the cycle of strengthening monetary policy and is ready to act decisively in the event of further implementation of pro-inflationary factors," such as an escalation of the conflict with Russia and further spikes in prices.
     The National Bank of Ukraine (NBU) raised its discount rate by 1 percentage point to 10.0 percent and has now raised it 4 percentage points since it began tightening its monetary policy stance in March 2021 in response to accelerating inflation amid improving demand and economic activity.
    "The realization of a significant number of pro-inflation risks requires strengthening the NBU's monetary policy to improve inflation expectations and ensure a steady reduction in inflation to 5%," the board of the central bank said.
     With economic growth expected to improve in 2022 from last year and inflation to be higher than previously forecast, NBU will keep monetary conditions "moderately tight" across its forecast horizon, adding the discount rate "will be at a level not lower than neutral" this year and following years.
     To strengthen the transmission of its policy and manage the surplus of liquidity in the banking system, NBU said it would raise the required reserve ratio on deposits in both hryvnia and foreign currencies by 2 percent in February, and would consider further measures in March.
     While the central bank said it would continue to use foreign exchange interventions to smooth excessive fluctuations, it added it would refrain from planned daily purchases of foreign currency in coming quarters to replenish its reserves, which amounted to US$5 million from August last year.
     Today's rate hike comes as inflation has eased in the last three months and fell to 10.0 percent in December from a 2021-peak of 11 percent in September, helped by record harvests, lower world food prices, a stronger exchange rate of the Hryvnia and past rate hikes.
     However, NBU said this decline was slower than expected and while it expects inflation to ease this year, it will first return to the 5 percent target in 2023 as energy prices remain higher than expected and rising incomes and stable consumer demand will restrain any slowdown in inflation.
     NBU raised its forecast for inflation in 2022 to 7.7 percent from 5.0 percent.
     Ukraine's economy grew around 3.0 percent in 2021 but the central bank lowered its forecast for growth this year to 3.4 percent from an earlier 3.8 percent due to the impact of expensive energy and the effect of the tensions with Russia, which continues to have some 100,000 troops by Ukraine's border.
      A new inflation report with updated forecasts will be published Jan. 27.
     "The key risks to the forecast remain Russia's escalation of the military conflict and a longer-than-expected price spike in the world," the bank said, adding prolonged geopolitical tensions can have a very negative effect on the expectations of citizens, businesses and investors.
     "It will also be a significant barrier to investment in the economy and make it more difficult to attract external financing," NBU said, adding in the event of a worsening of geopolitical risks, it would be ready to strengthen monetary policy.

Norway maintains rate but still eyes March hike

     Norway's central bank left its policy rate steady, as expected, but said it would "most likely" raise the rate in March as the upswing the country's economy had continued and underlying inflation had risen more than expected and was now close to the bank's inflation target.
     Norges Bank (NB) left its policy rate at 0.5 percent after raising it twice in the second half of 2021 (September and December) by a total of 50 basis points.
     "Based on the Committee's current assessment of the outlook and balance or risks, the policy rate will most likely be raised in March," said NB Governor Oeystein Olsen in a statement.
     In response to the COVID-19 pandemic, NB cut its rate three times and by a total of 1.5 percentage points to 0.0 percent and also slashed banks' countercyclical capital buffer by 1.5 percentage points to counter any tightening of banks' lending standards, which would amplify the economic downturn.
     But helped by the bounce-back in crude oil prices and the global economy, Norway's economy recovered swiftly in the second and third quarters of 2021, and headline inflation has topped the bank's 2.0 percent  target all year.
      In December last year, when NB raised its rate for the second time, it also raised the countercyclical capital buffer as of Dec. 31, 2022 and said it would most likely raise the rate again in March this year.
     Norway's headline inflation rate rose to a 2021-high of 5.3 percent in December, 2021, from 5.1 percent in November while the core inflation rate, which strips out tax changes and energy, rose to 1.8 percent from 1.3 percent.
    Norway's economy grew 5.1 percent year-on-year in the third quarter of 2021, down from 6.2 percent in the second quarter and while NB said higher COVID-19 infection rates had help back activity, unemployment appeared to be lower than it had forecast and relaxation of containment measures will likely contribute to a continued economic upswing.
     "Monetary policy is expansionary," the bank's monetary policy and financial stability committee said, adding:
    "In the Committee's assessment, the objective of stabilizing inflation around the target somewhat further out suggests that the policy rate should be raised towards a more normal level."
     NB publishes its monetary policy report four times a year - in March, June, September and December - and normally makes changes to its policy stance at the same time.

Wednesday, January 19, 2022

Sri Lanka raises rate 2nd time to ease demand

     Sri Lanka's central bank raised its key interest rates for the second time in six months and took further measures to boost foreign exchange reserves, saying these measures "will curtail the possible build-up of underlying demand pressures in the economy, which would also help ease pressures in the external sector, thus promoting greater macroeconomic stability."
     The Central Bank of Sri Lanka (CBSL) raised its Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by 50 basis points each to 5.50 percent and 6.50 percent, respectively.
     The rates have now been raised by 1 percentage point since CBSL began tightening its policy stance in August 2021 when it began to roll back the five rate cuts in 2020 - which totaled 2.50 percentage points - in response to the impact of the COVID-19 pandemic which hit its economy and tourism sector hard.
     Sri Lanka's inflation rate has risen steadily this year and although CBSL said it expects the supply-driven price pressures to be transitory, it also said "the possible build-up of demand driven inflationary pressures may compel the adoption of proactive monetary policy measures, which will also help in managing inflation expectations."
     Sri Lanka's inflation rate accelerated in the last three months to 12.1 percent in December from 9.9 percent in November and 3.0 percent in January.
     Sri Lanka's tourism sector was already under strain from the Easter Sunday bombings in 2019, which killed 267 people, and the central bank has estimated the country lost about US$9 billion in tourism revenues from the pandemic.
     The rise in oil prices delivered another blow to the country's dwindling foreign exchange reserves and Sri Lanka has undertaken a series of initiatives to restructure loans and rebuild currency reserves.
     Today, CBSL took several other measures, including mandating all registered tourist businesses to accept foreign exchange only for services to visitors from abroad and extending the timeline for additional incentive payments for remittances of U.S. dollars until April 30 from January 31.
     "In keeping with this policy stance, the Central Bank expects a corresponding increase in interest rates, particularly in deposit rates, thereby encouraging savings, while discouraging excessive consumption, which also fuels imports," the central bank said.
      Sri Lanka's economy shrank by 1.5 percent year-on-year in the third quarter of last year, down from growth of 12.3 percent in the second quarter but CBSL said economic activity toward the end of last year appears to have gathered momentum, helped by vaccinations, and forecast 2021 growth of around 4.0 percent, up from a contraction of 3.6 percent in 2020.
     Last week Ajith Nivard Cabraal, the bank's governor, forecast growth of around 5.5 percent in 2022.

China cuts key interest rate 2nd month in a row

      China's central bank cut its benchmark interest rate for the second consecutive month, as expected, following a cut in the rate of its medium-term loans earlier this week and yesterday's pledge by its deputy governor the central bank would open its "monetary tool box" wider to avoid a collapse in credit.
     The People's Bank of China (PBOC) cut its one-year Loan Prime Rate (LPR) by a further 10 basis points to 3.70 percent and has now cut it 15 points in two months following a 5 point cut in December.
     It is PBOC's 7th cut in LPR since it was introduced as the benchmark rate in August 2019, with the rate now having been cut a total of 65 basis points, including two cuts in response to the COVID-19 pandemic in February and April 2020.
     PBOC today also cut LPR on loans of 5 years or more - which impacts the cost of mortgages - by 5 basis points to 4.60 percent, the first cut since April 2020.
     The cut in 1-year LPR in December 2021 was part of PBOC's four moves last year to ease its monetary policy stance as authorities seek to carefully deflate the property market without triggering a credit crunch amid slower economic growth and higher inflation. 
     In July and December last year PBOC cut the reserve requirement ratio for most financial institutions by a total of 1 percentage point and also issued 85.5 billion in low cost loans to encourage financial institutions to boost their support from small enterprises and accelerate the creation of a green financial system.
     Expectations about the cut in LPR were fueled earlier this week when PBOC on Jan. 16 cut the interest rate on 700 billion yuan of one-year medium-term lending facility (MLF) loans by 10 basis points to 2.85 percent, its first cut since April 2020.
      LPR is calculated by the major financial institutions as a spread to MLF and reflects the cost of credit by 18 banks to their best customers.
      In addition to the cut in MLF, PBOC on Jan. 16 also cut the borrowing cost of 7-day reverse repos by 10 basis points to 2.10 percent when offering 100 billion yuan in reverse repos.
     On Jan. 18 PBOC Deputy Governor Liu Guoqiang told a press briefing the central bank would roll out more policies to stabilize economic growth, front-load actions and make pre-emotive moves as it seeks to spur the economy and credit. 
     In the fourth quarter of last year China's gross domestic product slowed for the third quarter in a row to an annual rise of 4.0 percent from 4.9 percent in the third quarter, 7.9 percent in the second quarter and 18.3 percent in the first quarter.
     For 2021 China's GDP grew 8.1 percent.
     Inflation in China decelerated to 1.5 percent in December from 2.3 percent in November while producer prices decelerated to growth of 10.3 percent from 12.9 percent, with analysts saying the slowdown in inflationary pressures would give PBOC space to ease policy further.


Sunday, January 16, 2022

This week in monetary policy: Japan, China, Sri Lanka, Malaysia, Uzbekistan, Indonesia, Norway, Ukraine, Turkey & Paraguay

    This week - January 17 through January 22 - central banks from 10 countries or jurisdictions are scheduled to decide on monetary policy: Japan, China, Sri Lanka, Malaysia, Uzbekistan, Indonesia, Norway, Ukraine, Turkey and Paraguay.
     Following table includes the name of the country, the date of the next policy decision, the current policy rate, the local time a policy decision is announced, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.
    The table is updated when the latest decisions are announced and can always be accessed by clicking on This Week.

JAN 17 - JAN 22, 2022
JAPAN18-Jan-0.10%00-0.10%         DM
CHINA20-Jan3.80%9:15-503.85%         EM
SRI LANKA20-Jan5.00%7:30004.50%         FM
MALAYSIA20-Jan1.75%15:00001.75%         EM
UZBEKISTAN20-Jan14.00%14:300014.00%         EM
INDONESIA20-Jan3.50%003.75%         EM
NORWAY20-Jan0.50%10:002500.00%         DM
UKRAINE20-Jan9.00%14:005006.00%         FM
TURKEY20-Jan14.00%14:00-100017.00%         EM

Saturday, January 15, 2022

Another 3 central banks raise rates 2nd week of 2022

       Another three central banks raised their main interest rates in the past week, continuing the tightening of global monetary conditions that picked up speed up in the final quarter of 2021, boosting the number of rate hikes so far this year to seven.
      During week two of 2022, the central banks of South Korea and Romania raised their policy rates for the third time each while Moldova raised its rate for the fifth time, with all three banks citing the need to tighten monetary policy in the face of rising inflation and solid economic growth despite the uncertainty from the COVID-19 pandemic.
      In addition to last week's rate hikes by the central banks of South Korea, Romania and Moldova, the monetary policy makers of Poland, Uruguay, Argentina and Peru have raised their rates this year.
     So far this year, central banks worldwide have taken 11 monetary policy decisions, with 87.5 percent of all changes to interest rates going to rate hikes.
     After the massive injection of fiscal and monetary stimulus in 2020 to ensure the global economy didn't collapse following the shutdown of the global economy in the first half of 2020 in the wake of the pandemic, authorities began to slowly roll back stimulus last year.
     In the first quarter of 2021, for example, central banks raised their rates 12 times but this then rose to 16 times in the second quarter, 38 times in the third quarter and then 58 times in the fourth quarter for a total 124 rate hikes by 41 different central banks.
     In contrast, only 10 central banks raised their rates 13 times in 2020 while 93 central banks cut their rates 256 times.
      So far this year two central banks - the Democratic Republic of Congo and South Sudan - have lowered their interest rates to help boost economic activity as inflation has trended lower in those countries in response to a revamping of monetary and economic policy, which has boosted investors' confidence in the economic stewardship and supported exchange rates.
     Cuts to interest rates so far this year account for 12.5 percent of all rate changes.
     In addition to raising or lowering policy rates, central banks also change their monetary policy stance by other tools, such as raising or lowering banks' reserve requirements, purchasing or selling assets or changing foreign exchange rates.
     Moldova's central bank, for example, last week raised its required reserve requirements for commercial banks - which means banks can make fewer loans to businesses or consumers -  returning it to the level prior to a cut in April 2021.
     Including Moldova's move, central banks have changed their monetary policy stance 10 times so far this year, with tightening steps accounting for 80 percent of all changes.
     The two steps central banks have taken to ease the monetary policy stance so far this year account for the other 20 percent of all decisions that change policy. 
     In comparison, in 2021 central banks took 50 steps toward easing their monetary policy stance, which accounted for 24.9% of all changes to monetary policy, whereas in 2020 monetary easing steps accounted for 96.3% of all changes to monetary policy.

Friday, January 14, 2022

Congo cuts rate 4th time as inflation seen easing

      The central bank of the Democratic Republic of Congo cut its benchmark interest rate for the fourth time in 10 months, saying this should strengthen the financing of the country's economy in Congolese francs and thus support the de-dollarization of the economy amid a greater control of inflation.
      The Central Bank of Congo (BCC) cut its key interest rate by 1 percentage point to 7.50 percent and has now cut it 11 percentage points after embarking on an easing cycle in March 2021 and following this up with rate cuts in April and June.
      Including the latest rate cut, BCC has now completely unwound an 11 percentage point rate hike in August 2020 that was aimed at anchoring inflation expectations after the Congolese franc plunged, pushing up import prices and inflation, due to the collapse in global demand for raw materials and metals during the crises-phase of the COVID-19 pandemic.
      Congo is Africa's largest copper producer and the world's leading miner of cobalt, used in batteries.
      The latest rate cut was decided at meeting of the bank's monetary policy committee (CPM) on Dec. 30, 2021 and announced on the bank's website in a statement dated Jan. 2, 2022.
      In addition to the rate cut, CPM said banks' mandatory reserves should be in local currency from now.
      "2021 was marked by a stability in the macroeconomic framework," BCC said, adding this was a reflection a good coordination of monetary and budgetary policies.
       Based on the latest estimates, BCC estimated economic growth in 2021 of 5.7 percent, up from 2020's 1.7 percent, and forecast growth this year of 6.1 percent.
       BCC estimated inflation in Congo in 2021 of 5.1 percent in 2021, saying this reflected the relatively stable exchange rate, and inflation of around 5.0 percent in 2022.
       The Congolese franc fell sharply in May 2020 in response to the pandemic, and continued its sharp fall until BCC's rate hike in August, which came the month after the current governor, Malunga Kabuki Mbuyi, was appointed as the country's first female governor.
      After the sharp rate hike, the franc stabilized but ended the year down some 14 percent against the U.S. dollar.
       In 2021 the franc mainly moved sideways against the dollar, but below the 2,000 level, to end the year 0.9 percent below its level at the start of the year.
      So far this year the franc has strengthened marginally and was trading at 1,991.4 to the U.S. dollar today, up from 1,993.1 at the start of the year.
     "The CPM stressed that the outlook for 2022 is good for the Congolese economy," BCC said, adding the forecast for growth and inflation was based on the "rigorous implementation of sound economic policies" begun in 2021, particularly a respect of the stability pact between the central bank and the finance ministry, the "meticulous: execution of structural reforms, and alignment of monetary and budgetary policies.


Thursday, January 13, 2022

South Korea raises rate 3rd time, inflation seen higher

      South Korea's central bank raised its monetary policy rate for the third time, as widely expected, and said it will continue to "appropriately adjust the degree of monetary policy accommodation as the Korean economy is expected to continue its sound growth and inflation to run above the target level for a considerable time, despite underlying uncertainties over the virus."
      The Bank of Korea (BOK) raised its base rate by another 25 basis points to 1.25 percent and has now raised it by 75 basis points following rate hikes in August, November and today.
      In November the central bank's monetary board also said it would appropriately adjust the degree of policy accommodation as the economy is expected to continue growing and inflation to run above the bank's target of 2.0 percent.
      Deciding when to tighten monetary policy again, BOK said it would take into account the impact of COVID-19 on growth and inflation, the risk of a buildup of financial imbalances, the effect of rate increases and changes in monetary policy in other countries.
     Today's rate hike was widely expected as the bank's governor, Lee Ju-yeol, on Dec. 24 and Dec. 31 said interest rates would need to be adjusted in line with improving economic conditions.
      "The Korean economy has continued to recover despite the resurgence of COVID-19," BOK said today, adding it still projects growth this year of around 3 percent, as forecast in November.
      South Korea's gross domestic product slowed in the third quarter of 2021 to annual growth of 4.0 percent from 6.0 percent in the second quarter, with growth in 2021 estimated around 4.0 percent.
      A tightening of pandemic-related restrictions had moderated growth in private consumption but exports had remained buoyant due to robust global demand, BOK said, adding facilities investment had slowed due to global supply constraints.
      "Going forward, the economy is likely to sustain its sound growth, as the recovery of private consumption is forecast to pick up again while exports are expected to continue their solid trend of increase," BOK said.
      Inflation in South Korea has topped 3 percent in the last three months - it eased slightly to 3.7 percent in December from 3.8 percent in November - and BOK said it now expects inflation to continue to run in the 3.0 percent range "for a considerable time," exceeding the path it projected in November.
     In November BOK raised its forecast for 2021 inflation to 2.3 percent and expected inflation to remain at that level in the first half of 2022 before easing in the second half of the year to average 2 percent.
     BOK now expects headline inflation to be above 2 percent this year while core inflation is expected to run "considerably" above 2 percent.

Moldova raises rate 5th time, and RRR on inflation rise

      Moldova's central bank tightened its monetary policy stance sharply at another extraordinary meeting of its executive board - citing the recent acceleration in inflation - by raising its interest rate for the fifth time and increasing the required reserve ratio for commercial banks.
     The National Bank of Moldova (NBM) raised its interest rate on its short-term monetary policy operations by another 2 percentage points to 8.50 percent and has now raised it 5.85 percentage points since it began tightening in July last year by raising the rate and followed this up with rate hikes in September, October, December and today.
     The rate hike in October was also decided by the bank's board at an extraordinary meeting that was held in response to the country's energy crises triggered by the expiry of a gas contract with Russia.
     NBM today also raised the ratio on required reserves for commercial banks' deposits in the Moldavian leu by 2 percentage points to 28.0 percent, returning it to its level prior to a cut in April 2021. 
    The ratio on deposits on convertible foreign currencies remains unchanged, the bank said.
    The rate on overnight loans and deposits was also raised by 2 percentage points to 10.50 percent and 6.50 percent, respectively,
    "The configuration of monetary policy aims at tempering inflationary pressures to lessen the effects of shocks on the economy for its faster return to balance," the bank's board said, adding it had also raised its forecast for inflation in coming quarters amid rising global inflation.
     Inflation in Moldova, Europe's poorest country, rose to 13.94 percent in December from 12.4 percent in November for the highest rate since June 2008 and well above NBM's target of 5.0 percent, plus/minus 1.5 percentage points.
     The central bank said the recent rise in inflation illustrated the vulnerability of domestic inflation to external developments while demand is also putting upward pressure on inflation as disposable income and consumer credit its rising.
     New loans in leu rose 46.7 percent year-on-year in December, close to a historical record, and NBM said the increase in the interest rate and reserve ratio aims to reduce the growth in consumer credit, which it said had "a strong pro-inflationary impact and puts pressure on the current account deficit of the balance of payments, trade balance and exchange rate."
     In December the International Monetary Fund's (IMF) executive board approved Moldova's request for funds under its extended fund and credit facilities, enabling disbursement of US$79.8 million, with total payments under the 40-month program amounting to $558.3 million.
     Moldova's economy is recovering after an estimated contraction of 7.0 percent in 2020 due to the COVID-19 pandemic and drought, with IMF forecasting growth in 2021 of 7.5 percent and 4.5 percent in 2022.

Wednesday, January 12, 2022

South Sudan cuts rate, RRR to boost economic growth

      South Sudan's central bank lowered its policy rate and its reserve requirements to achieve 1.0 percent economic growth in the current fiscal year, maintain inflation in single digits, boost lending to the private sector and increase international reserves.
      In a statement by its new governor, Moses Makur Deng, the Bank of South Sudan (BOSS) cut its central bank rate by 300 basis points to 12 percent for 2022 and the minimum reserve requirement ratio (RRR) on local currency deposits by 500 points to 15.0 percent. 
     The reserve ratio on foreign currency deposits was lowered to 20.0 percent, according to a statement on the bank's website with highlights from a press conference on Jan. 11.
     "Lower interest rates encourage economic activity and thus growth," said Deng, who was sworn in on Jan. 5, 2022 as governor and chairman of the bank's board of directors, replacing  Dier Tong Ngor.
      Deng, previously the central bank's director general for bank supervision, research and statistics, was instructed by the country's president, Gen. Salva Kiri Mayardit, to work hard with his counterparts, the ministry of finance and other institutions to improve the country's economy and to work for price stability, according to the BOSS website.
      In response to the COVID-19 pandemic, BOSS lowered its central bank rate by 200 basis points in April 2020 and then another 300 points in July to 10.0 percent. BOSS also lowered the reserve requirement by a total of 10 percentage points.
      But in November 2020, at an extraordinary monetary meeting, BOSS took several measures to tighten its monetary policy to counter the drop in the exchange rate of the thinly-traded South Sudanese pound.
     This included raising the interest rate by 500 basis points to 15.0 percent - unwinding the two rate cuts in April and July - doubling the reserve requirement and cash reserve ratio to 20 percent, laying out plans to introduce bills to manage liquidity and boosting its role as a supervisor.
      The economy of South Sudan, which gained independence from Sudan in 2011, was hit hard by the fall in oil prices and the pandemic in 2020, with the economy shrinking 3.6 percent and both fiscal and balance of payments deficits widening.
      In the past, monetization of fiscal deficits resulted in high inflation and exchange rate depreciation but starting in October 2020 authorities stopped monetary financing of the deficit and this has helped stabilize the exchange rate along with FX auctions.
      In March last year the International Monetary Fund's (IMF) executive board approved a payment of US$172.2 million to South Sudan, half of its quota, the second financial assistance by the IMF since South Sudan joined in 2012.
     Deng said BOSS had managed to unify the multiple exchange rates and stabilize the South Sudanese pound at 432 per U.S. dollar as of Dec. 31, 2021 and headline inflation had declined significantly to 13.2 percent in December last year from 58 percent in December 2020.
     "The Bank of South Sudan is also determined to bring down further to a single digit by the end of 2022," Deng said, targeting annual inflation of 8.0 percent with a margin of plus/minus 1 percentage point.
     Other objectives include 1.0 percent gross domestic product growth in fiscal 2021/22, which began July 1, commercial bank lending to the private sector of 40 percent of total deposits and building international reserves of about 4.0 months of import cover.
      BOSS's operational policy target was to maintain nominal growth of broad money at around 9.0 percent, plus/minus 1 percent, and will use minimum reserve requirements, open market operations, the central bank rate and foreign exchange operations to achieve the operational target.
      As part of open market operations, which helps regulate money supply and credit conditions through the sale and purchase of eligible securities, Deng said BOSS on Feb. 1 would introduce Term Deposit Facilities (TDF) to acquire deposits through transfers with commercial banks at an agreed auction price. 

Monday, January 10, 2022

Romania raises rate 3rd time, Q4 economy at standstill

     Romania's central bank raised its main interest rate for the third time as it normalizes its monetary policy stance amid a worsening outlook for near-term inflation, but also also said economic activity in the fourth quarter of 2021 had come to a "standstill" due to the fourth wave of the COVID-19 pandemic, supply bottlenecks and the energy crises.
     The National Bank of Romania (NBR) raised its monetary policy rate by a further 25 basis point to 2.0 percent and has now raised the rate a total of 75 basis points following rate hikes in October and November last year, and today.
      In response to the pandemic, the central bank in 2020 cut the rate four times and by a total of 1.25 percentage points and the rate is now back to its level in March 2020 after the first rate cut.
     NBR also widened the interest rate corridor to plus/minus 1 percentage point around the policy rate from 75 basis points, raising the Lombard lending rate to 3.0 percent from 2.50 percent while the deposit rate will be maintained at 1.0 percent.
    "These decisions are circumscribed to the process of gradual normalization of the monetary policy conduct that the NBR is carrying out, amid high uncertainties," the bank's board said, adding it was also maintaining firm control of liquidity in the money markets.
     Romania's inflation rate eased to 7.80 percent in November from 7.94 percent in October but NBR said inflation is expected to rise gradually in coming months despite measures to cap electricity and gas prices for households due to higher-than-expected impact of supply-side shocks, higher-than-expected increases in natural gas and electricity prices, and processed food prices.
     NBR said this is likely to amplify and prolong the deviation of inflation from the upper bound of its target although there are still significant uncertainties over how the price caps will feature in the calculation of prices along with the outlook for commodity prices and global supply bottlenecks.
     The central bank targets inflation of 2.5 percent, plus/minus 1 percentage point.
     Romania's economy slowed to 0.4 percent quarterly growth in the third quarter from 1.5 percent in the second quarter - a move that was "contrary to expectations," according to NBR - and recent data point to a standstill in economic activity in the fourth quarter, which entails lower growth than forecast in November.
     In November NBR raised its forecast for inflation in 2021 to 7.5 percent from the August forecast of 5.6 percent, with inflation gradually easing in 2022 to 5.9 percent by the fourth quarter and then 3.3 percent buy the third quarter of 2023.