National Bank of Romania Cuts Rate 25bps to 5.50%

The Banca Nationala a Romaniei cut its key monetary policy interest rate by another 25 basis points to 5.50% from 5.75%.  The Bank said: "Looking at domestic developments, statistical indicators reveal the persistence of negative output gap despite positive dynamics in exports, industrial and farming outputs, the current account deficit staying at sustainable levels, but also a gradual recovery of credit to the private sector. The external environment shows that uncertainties remain regarding the resolution of the Eurozone sovereign debt crisis, with impact on investors' risk aversion, capital flow volatility, as well as on global economic developments."

Previously the Bank also cut the rate 25 basis points in November and at its January meeting this year, prior to that its last move was a 25 basis point cut in May 2010.  Romania reported annual consumer price inflation of 3.44% in November, compared to previous readings of 3.45% in September, 4.25% in August, 4.85% in July, 7.9% in June, 8.4% in May and 8.3% in April 2011, and now within the Bank's inflation target range of 3% plus or minus 1%.

The Romanian economy expanded 1.8% in Q3 2011 (0.2% in Q2), placing annual growth at 2.6% (0.3% in Q2).  Romania's currency, the Romanian Leu (RON), has weakened about 5% against the US dollar over the past year, while the USDRON exchange rate last traded around 3.30.

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