The central bank cut earlier Tuesday its main monetary policy rate by 25 basis points to a record low of 2%, in a widely expected move, but analysts said this could be the last reduction in the current cycle.
“I cannot confirm nor deny we are at the end of a rate reduction cycle,” said Mugur Isarescu during a news briefing.
“By our definition, the monetary policy, at least in Romania, is not limited to the monetary policy rate, but includes minimum required reserves and the corridor (of interest rates on the standing facilities around the policy rate).”
The governor added the bank could change the corridor, without moving the key rate.
Tuesday, the central bank decided to narrow the symmetrical corridor to plus/minus 1.75 percentage points from plus/minus 2 percentage points. Thus the interest rate on the central bank’s lending facility (Lombard) is lowered to an annual 3.75% from 4.25%, while its deposit facility rate will remain at 0.25%.
The bank kept its minimum requirement ratios at 14% for hard currency deposits and 10% for leu deposits.
Isarescu answered the questions about a continuation of the monetary policy easing by saying the required reserve ratios need to converge to the European average of 2%.
However, he noted that next board decisions will be influenced by the inflation course and other “uncertain for now” data, but also fiscal policy decisions, such as the recently announced tax cuts.