The central bank also kept minimum reserve requirements on foreign currency liabilities and for leu deposits unchanged at 8%.
The annual inflation rate advanced to a slightly higher-than-projected 0.64 percent in May 2017, after resuming in April the growth that had been discontinued in March 2017, the bank said in a detailed statement.
Economic growth sped up significantly in the first quarter of 2017, above expectations, with real GDP expanding year on year by 5.7%, against the previous three months’ 4.8%. Swifter GDP dynamics were fully accounted for by domestic demand. By contrast, the contribution of net exports to GDP growth slipped again into negative territory, as the faster annual pace of imports outran that of exports of goods and services, which hit a 3-year high.
Real monetary conditions remained stimulative in the second quarter of 2017. The annual growth of credit to the private sector continued in May 2017 at a rate similar to that seen in April, i.e. 3.2%. The halt in the upward trend recorded previously was attributable to a slight deceleration in the annual dynamics of credit to non-financial corporations and the renewed pick-up in the pace of increase of loans to households, consumer credit in particular.
The share of leu-denominated credit in total private sector loans continued to widen to 59.3% (from a low of 34.6% in May 2012), amid further divergent developments in the two components (up 13.3% for lei and down 8.7% for foreign currency in May). This certifies the improvement in monetary policy transmission, while also helping mitigate risks to financial stability.
The latest assessments reconfirm the outlook for the annual inflation rate to stick to an upward path in the near future. The uncertainties and risks surrounding this outlook are, however, influenced by both domestic and external developments.
Domestically, they are compounded by the fiscal and income policy stance, also in the context of the recent legislative initiatives in the area. Looking at the external environment, further relevant are the uncertainties and risks associated with euro area and global economic growth, especially amid Brexit talks and the US Administration’s economic policies, as well as with the decisions of the major central banks (ECB, Fed).