Romania's central bank maintained its monetary policy rate at 1.75 percent, saying it expects inflation to remain negative the rest of this year and then slowly rise and return to within its target range by the second half of 2017.
The National Bank of Romania (NBR), which has left its key rate steady since May 2015, added it would cut the minimum reserve requirement ratio on banks' foreign exchange liabilities to 10 percent from 12 percent to further harmonize its standards with that of the European Central Bank (ECB).
The reserve requirement on leu-denominated liabilities remains at 8 percent.
Romania's inflation rate was minus 0.2 percent in August, up from 0.8 percent in July, as expected by the central bank. The NBR targets inflation of 2.5 percent, plus/minus 1 percentage point.
Romania's inflation rate has been pushed down by a combination of a cut in Value-Added-Tax to 20 percent from 24 percent, lower food and energy prices and weak demand and wages costs. As the impact of the VAT cut fades, inflation is expected to rise.
In its August inflation report the NBR forecast year-end inflation of 0.4 percent and 2.0 percent in 2017, with inflation seen at 1 percent this year when excluding the first-round effects of the VAT cut and 2.3 percent in 2017.
Romania's economy grew more than expected in the second quarter of this year due to higher household consumption and investment, pushing up the current account deficit, the NBR said.
Romania's Gross Domestic Product grew by an annual 6.0 percent in the second quarter, up from 3.8 percent in the first quarter.
The National Bank of Romania issued the following statement: