BNR Cuts Key Rate To Record Low 1.75%; Leu Requirements Also Lowered

Update 05.06.2015 By Bogdan Neagu

Romania’s central bank on Wednesday surprisingly lowered its main monetary policy rate by 25 basis points to a new record low of 1.75%, the seventh rate cut in the current reduction cycle started in August 2014.

In its latest board meeting on March 31, the bank adopted a similar rate cut, but analysts said that was the end of the current reduction cycle, estimating the policymakers will turn to lowering minimum requirement ratios, which are largely above the European averages.

And the bank added to the rate cut a two-percentage point reduction to the minimum reserve requirement ratio for leu deposits, to 8% from 10%. However, the bank kept its requirement ratio at 14% for hard currency deposits at its Wednesday board meeting.

The central bank continues the tightening of the symmetrical corridor of interest rates on the standing facilities around the policy rate, by reducing it to plus/minus 1.5 percentage points from plus/minus 1.75 percentage points.

“Thus, starting 7 May 2015, the interest rate on (the central bank’s) lending facility (Lombard) is lowered to an annual 3.25% from 3.75%, while its deposit facility rate will remain at 0.25% per annum,” the bank said in a statement.