Wednesday, January 8, 2014

Romania cuts rate 25 bps to 3.75%, 5th cut a row

    Romania's central bank cut its policy rate by 25 basis points to 3.75 percent, its fifth rate cut in a row, and lowered the minimum reserve requirements on both domestic and foreign currency liabilities by banks.
    In a brief statement, the National Bank of Romania said the reserve requirements on leu-denominated liabilities would be cut by 300 basis points to 12 percent while foreign currency liabilities would be cut by 200 basis points to 18 percent starting from the Jan. 24-Feb. 23 maintenance period.
    Further details about the central bank's decision would be released at a press conference later today.
    Romania's central bank cut its rate by 125 basis points in 2013, most recently in November, in response to falling inflation.
    In its November inflation report, the bank revised down its forecast for end-2013 inflation to 1.8 percent from 3.1 percent, and the 2014 forecast down to 3.0 percent from 3.1 percent. The central bank bank, which targets inflation of 2.5 percent within a one percentage point band, said it expected inflation to fall below its lower bound during the first half of this year and then gradually rise.
    Romania's inflation rate eased to a new low for the year of 1.83 percent in November, down from 1.88 percent in October and a 2013-high of 6.0 percent in January. The fall in inflation was due to lower agricultural prices due to a good harvest and a cut in taxes on bread and other bakery products.
    The cut in reserve requirements comes after the central bank in December released a report into the reporting of bad bank debts that showed that the proportion of non-performing bank loans was 21.7 percent at the end of October.


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