Romania Ctrl Bank Leaves Key Rate Unchanged At 6.25%

Romania’s central bank Wednesday left its main interest rate at a record low of 6.25% a year for the second straight month as it continues battling rising inflation following a raise in the sales tax.

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The central bank also decided to maintain the current levels of the minimum reserve requirements at 15% for Romanian leu-denominated liabilities and 25% for foreign currency liabilities.

Romanian annual inflation accelerated to 7.6% in August following the enforcement early July of a 5 percentage points increase in the value added tax level to 24%.

Central bank governor Mugur Isarescu said the bank would remain cautious against possible second-round effects of the tax hike, which are seen driving the inflation to around 8% by year-end.

The central bank cut its key rate in four steps this year, from 8% at the end of 2009, but kept the minimum reserve requirements unchanged for both local and foreign currency liabilities.

Over the course of 2009, the central bank has lowered the key monetary policy rate by 225 basis points.

The next monetary policy meeting is scheduled for November 2, when the central bank is also expected to release a new quarterly inflation report.

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