Romania's central bank held its policy rate steady at 5.25 percent, saying inflation is expected to continue to follow a downward trend due to a persistent negative output gap and reach the ceiling of the central bank's inflation target by the end of this year.
The National Bank of Romania (NBR), which has held rates steady since a 25 basis point cut in March 2012, said annual inflation fell to 5.65 percent in February from January's 5.97 percent. The adjusted core2 inflation rate was 3.1 percent in February, just below January's 3.2 percent.
The NBR targets annual inflation of 2.5 percent, plus/minus one percentage point.
Romania's Gross Domestic Product expanded by 0.1 percent in the fourth quarter from the third for annual growth of 0.3 percent, up from a 0.3 percent contraction in the third quarter.
The central bank said a widening of the negative output gap had slowed in the fourth quarter and monetary indicators point to lending to the private sector to remain in negative territory, as in the euro area and in most countries in this region.
"As domestic political and financial tensions eased, the NBR carefully calibrated the monetary policy instruments, also by shifting from firm to adequate liquidity management, which led to an improvement of liquidity conditions on the money market and hence drove interbank rates considerably lower," the central bank said.
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