BNR decided to maintain the monetary policy interest rate at the level of 7% per year

Uncertainties and major risks related to the inflation outlook stem from the configuration of the package of fiscal-budgetary measures that are expected to be implemented in order to continue the budget consolidation, according to a press release from the National Bank of Romania (BNR)."According to current assessments, the annual inflation rate will continue to decrease until the end of the current year in line with the latest medium-term forecast (August 2023), mainly under the influence of base effects and downward corrections in the quotations of some goods, such as and in the conditions of the rich domestic harvest and the temporary capping of the commercial addition to basic food products. Beyond the end of the current year, major uncertainties and risks related to the inflation outlook arise from the configuration of the package of fiscal-budgetary measures that are predicted to be implemented in order to continue the budgetary consolidation, as well as from the future conduct of the fiscal and revenue policy, of a nature to exert inflationary effects in the short term, but to intensify the disinflationary pressures of the fundamental factors on a more distant time horizon," the press release reads.At the same time, the BNR notes that significant uncertainties and risks regarding the perspective of economic activity, implicitly the medium-term evolution of inflation, are generated by the war in Ukraine and economic developments below expectations in Europe, and the absorption of European funds, mainly those related to the Next program Generation EU is conditioned by the fulfillment of strict goals and milestones. It is, however, essential for achieving the necessary structural reforms, including the energy transition, but also for counterbalancing, at least partially, the contractionary impact of shocks on the supply side, amplified by the tightening of economic and financial conditions on the international level. Also relevant are the perspective of the conduct of the monetary policies of the ECB and the Fed, as well as the attitude of the central banks in the region.In the meeting on Thursday, October 5, 2023, based on the evaluations and data available at this moment, as well as in the conditions of high uncertainties, the Board of Directors of the BNR decided to maintain the monetary policy interest rate at the level of 7% per year. At the same time, it was decided to maintain the interest rate for the credit facility (Lombard) at 8% per year and the interest rate for the deposit facility at 6% per year. Also, the Board of Directors of the BNR decided to maintain the current levels of the mandatory minimum reserve ratios for liabilities in lei and in foreign currency of credit institutions.The Board's decisions aim to bring the annual inflation rate back in line with the stationary target of 2.5% ?1 percentage point, including by anchoring inflationary expectations in the medium term, in a way that contributes to the achievement of sustainable economic growth. In the current context, the balanced mix of macroeconomic policies and the implementation of structural reforms including the use of European funds to stimulate long-term growth potential are essential for maintaining macroeconomic stability and strengthening the capacity of the Romanian economy to face adverse developments.The BNR specifies that it closely monitors the developments of the domestic and international environment and will continue to use the instruments at its disposal in order to fulfill the fundamental objective of medium-term price stability.The minutes of the deliberations regarding the adoption of the monetary policy decision during the Thursday meeting will be posted on the BNR website on October 19, 2023.According to the announced calendar, the next meeting of BNR's Board dedicated to monetary policy will take place on November 8, 2023.