Romania's central bank maintained its policy rate at 3.5 percent, as expected, and said its latest assessment confirms that inflation should remain subdued in the months ahead, in line with the bank's forecast that inflation will return to and remain inside the bank's tolerance range.
The National Bank of Romania (NBR), which last month cut its rate for the sixth time in a row, said the risks in its outlook stem primarily from external sources. This includes capital flow volatility, which is linked to investors' risk appetite and driven by geopolitical developments, faster cross-border deleveraging by banks and the overall changes to investors' exposure to emerging economies.
Romania's inflation rate fell to a historic low of 1.05 percent in February from 1.55 percent end-2013, with the average annual HIPC rate, which can be compared with EU countries, declining to 2.6 percent from 2.9 percent in January. In January 2013 the inflation rate hit 6.0 percent.
Last month the the NBR revised upwards its 2014 inflation forecast to 3.5 percent from 3.0 percent and forecast 2015 inflation of 3.2 percent. The central bank's vice governor said in New York on Feb. 6 that the central bank had ended its rate cutting cycle.
The central bank targets inflation of 2.5 percent, plus/minus one percentage point.
Romania's Gross Domestic Product expanded by 1.5 percent in the fourth quarter of 2013 from the third quarter for annual growth of 5.1 percent, up from 4.2 percent.
The central bank attributed the pick-up in economic activity to a favorable performance of exports and improved domestic demand.