Romania Unexpectedly Slashes Policy Rate For Seventh Time To New Low

(RTTNews) - Romania's central bank on Wednesday cut its key interest rate unexpectedly for the seventh consecutive session to a new low.

The Board of the National Bank of Romania reduced the monetary policy rate to 1.75 percent from 2 percent. Economists had expected the bank to leave rates unchanged following a quarter-point reduction in March.

The central bank has lowered the rate steadily from 3.5 percent in six quarter-point reductions since August last year.

In March, the bank said it expects annual inflation to embark on a slight uptrend, mainly reflecting the combined effect of developments in volatile prices and of the narrowing of the negative output gap.

Inflation accelerated faster-than-expected in March to 0.8 percent from 0.4 percent in February, yet remain well away from the bank's aim to keep inflation between 1.5 percent and 3.5 percent.

The bank also decided to narrow the symmetrical corridor of interest rates on its standing facilities around the policy rate to ±1.5 percentage points from ±1.75 percentage points.

Hence, the deposit rate was left unchanged at 0.25 percent, while the lending facility, or lombard rate, was cut to 3.25 percent from 3.75 percent.

Policymakers also decided to cut the minimum reserve requirements ratio on leu-denominated liabilities of credit institutions to 8 percent from 10 percent. The ratio on the foreign exchange-denominated liabilities was kept unchanged at 14 percent.