“We don’t usually say what we’ll do in the next (board) meeting, but when we talk about lower levels of all inflation-measuring markers, and the improvement of inflation expectations… our message is Romania will enter an interest rate lowering cycle,” Isarescu told a press briefing after the central bank’s board meeting on monetary policy issues.
Thursday, the central bank kept the key rate unchanged at 5.25%, the highest level in the European Union.
Isarescu said the inflation is falling more rapidly than projected at the beginning of the year, bringing forward a rate cut process initially scheduled for the last part of the year.
“We will start a cycle … of several monetary policy rate cuts. We will not stay isolated from the rest of Europe,” Isarescu also said.
In its Thursday meeting, the central bank also kept its minimum reserve requirement for lenders unchanged at 15% for Romanian leu-denominated liabilities and at 20% for foreign-currency liabilities. However, it narrowed the corridor around the monetary policy rate for the bank’s standing facilities to +/- 3 percentage points from +/- 4 percentage points in order to temper interest rate volatility on the money and banking markets.
“We started with the corridor because the key rate loses its importance if the transmission is not effective,” the central bank’s chief also said.