Romania's central bank cut its policy rate by a further 25 basis points to 2.0 percent, saying evidence suggests that inflation will start to rise but remain below the lower bound of the bank's target range while nearly all indicators hint at economic growth consolidating.
The National Bank of Romania (NBR), which has now cut its rate by 325 basis points since embarking on an easing cycle in July 20134, also further narrowed the symmetrical corridor around its standing facilities to 1.75 percent from 2.0 percent with the aim of containing money market volatility and strengthen the transmission of its policy rate cut. From April 1, the NBR's deposit rate will remain at 0.25 percent while the Lombard lending rate will fall to 3.75 percent from 4.25 percent.
Romania's headline inflation rate was steady at 0.4 percent in February and January and the NBR said it reflected the combined effect of volatile prices and of the "narrowing, yet still significant negative output gap."
The NBR targets inflation of 2.5 percent, plus/minus one percentage point.
Romania's Gross Domestic Product expanded by 0.5 percent in the fourth quarter of last year from the third quarter for annual growth of 2.6 percent, down from 3.3 percent on the back of rising consumption and a positive contribution from fixed capital formation for the first time in two years.
Last month the International Monetary Fund (IMF) forecast GDP growth of 2.7 percent this year and 2.9 percent next year, with private consumption the main driver.
The IMF also said it supported further easing steps by Romania's central bank amid declining inflation expectations, lower oil prices, a persistent negative output gap and monetary easing by the European Central Bank.
The National Bank of Romania issued the following statement: