It is the first rate cut since March 2012. A government collapse in April last year and volatile external markets have prompted the bank to halt its monetary easing cycle.
“The decision sought to firmly anchor inflationary expectations, consolidate the transmission of the monetary policy drive and increase confidence in the economic performance as the country has accomplished the agreements signed with the international financial institutions,” the central bank said in a separate statement Monday.
The monetary policy decisions should convey a positive signal to the banking system, as well as to the business community and the population, by prompting a gradual reduction of leu-denominated loan costs and by stimulating economic activity, the central bank said.
Moreover, the bank’s monetary policy aims to ensure medium-term price stability while preserving financial stability and helping mitigate the negative influence on the Romanian economy of both local and external factors, the statement noted.
The central bank also lowered the interest rate on its Lombard lending facility to 8% from 8.25% previously. The deposit facility was trimmed to 2%, from 2.25% initially.
The minimum reserve requirements were left unchanged at 15% for Romanian-leu denominated liabilities and at 20% for foreign currency liabilities.
Local analysts expected the key lending rate would have stayed at 5.25% after today’s meeting, despite clear indications from the central bank’s chief that the institution was ready to start a new easing cycle.
Governor Mugur Isarescu said last month that inflation was decelerating faster than projected, bringing forward a rate cut process initially scheduled for the last part of the year.
The bank has recently revised downward its inflation forecast for 2013 to 3.2% from 3.5% previously, citing the smaller inflationary impact of fuel and volatile prices.