The bank made a surprise cut of its main interest rate in Wednesday’s board meeting, slashing another 25 basis points to a record low 1.75%.
The bank also lowered its minimum reserve requirement ratio for leu deposits to 8% from 10%, while keeping the minimum requirement for foreign currency deposits at 14%.
“The prospects for the inflation rate to drop to around nil in the following three to four quarters cause these monetary policy decisions to foster lending in a manner supportive of sustainable economic growth and, at the same time, to keep real deposit rates in positive territory,” the bank said.
In today’s meeting, the bank’s board has examined and approved the quarterly inflation report. “Compared to the February 2015 forecast, the new quarterly projection shows a notably lower path of the expected annual inflation rate,” said governor Mugur Isarescu in a press briefing after announcing the board decisions.
The food products make up almost a third of the inflation basket, the bank noted, so that “the annual inflation rate is expected to come in at around nil between June 2015 and May 2016, before re-entering the variation band of the target in the final quarter of next year.”
The central bank targets an inflation rate of between 1.5% and 3.5%. In March, the annual rate was at 0.8%.
In the February inflation report, the bank lowered the estimate for the end-year inflation to 2.1%, but that forecast was made before the government announced its plans to cut the VAT rate.