The recent and near-term decrease in the annual inflation rate on a significantly lower trajectory than previously anticipated and the still high uncertainties associated with developments in the more distant time horizon justify a prudent reduction in the monetary policy interest rate, appreciated the members of the Board of Directors of the National Bank of Romania, according to the Minutes of the monetary policy meeting of July 5.The members of the Board highlighted the increased uncertainties and risks arising from the conduct of fiscal and revenue policy in 2024, against the background of the budget execution from the first five months of the year, as well as the dynamics of salaries in the public sector and the full impact of the new pension law . The great risks associated with the conduct of these policies on a more distant time horizon were also evoked, in the context of the fiscal and budgetary measures that could be implemented in order to achieve the fiscal correction and position the budget deficit on a sustainable decreasing trajectory compatible with the requirements of the procedure of excessive deficit and with the conditions attached to other agreements concluded with the EC, underlines the Minutes published by the central bank on Wednesday.Regarding the near-term perspective, the members of the BNR Board of Directors showed that, according to recent data and analyses, the annual inflation rate will continue to decrease in the coming months on a significantly lower trajectory than the one highlighted in the medium-term forecast of May 2024 , which dropped to 4.9% in December 2024, to 3.5% in the last month of 2025 and to 3.4% at the end of the projection horizon.The document draws attention to the fact that there are significant uncertainties regarding the prospective impact on natural gas and electricity prices of the legislative changes applied in April, as well as regarding the future evolution of the quotation of coal and other raw materials, especially in the context geopolitical tensions.The Board of Directors of the BNR unanimously decided, at the beginning of July, to reduce the monetary policy interest rate to 6.75%, from 7%. At the same time, it decided to reduce the interest rate for the credit facility (Lombard) to 7.75%, from 8%, and the interest rate related to the deposit facility to 5.75%, from 6%. Also, the Board of Directors of the BNR unanimously decided to maintain the current levels of the mandatory minimum reserve ratios for the liabilities in RON and in foreign currency of the credit institutions.
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