The National Bank of Romania, which has now cut its rate by 250 basis points since August 2013, also said it would narrow the symmetrical interest rate corridor on its standing facilities to plus/minus 2.50 percent from 2.75 percent to mitigate interbank money market volatility and improve the transmission of the bank's rate signals.
Starting from Nov. 5, the rate on NRB's Lombard lending facility will be cut to 5.25 percent from 5.75 percent while the deposit rate will remain at 0.25 percent.
Continuing its policy of harmonizing its reserve requirements with European standards, the NBR also cut the ratio of foreign currency-denominated liabilities to 14 percent from 16 percent while the minimum reserve requirement on leu-denominated liabilities remains at 10 percent.
Romania's headline inflation rate rose to 1.5 percent in September from 0.8 percent in August as the impact of the 2013 cut in VAT on milling and bakery products fades while inflation based on the EU's HIPC index was unchanged at 1.3 percent in September from August.
The NRB, which targets annual inflation of 2.5 percent, plus/minus one percentage point, said the downward shift in the inflation path stems mainly from the negative output gap, lower inflation expectations and subdued inflation and weak economic recovery in Europe.
The NRB issued the following statement: