The bank also kept its minimum reserve requirement ratios at 8% for leu deposits and at 14% for foreign currency deposits.
The central bank sees the inflation rate near zero for the next three to four quarters, following the government’s decision to cut the value added tax rate for all food products to 9% from 24% starting June 1. The inflation prospects are further lowered by the adoption of a new Tax Code, which includes the cut of the standard VAT rate to 19% as of next year.
In May, the central bank surprised markets with a 25-basis point rate cut to an all-time low of 1.75%, as most analysts expected the policymakers to keep the interests unchanged.
For the current Board meeting, most analysts expected a further cut to 1.5% before the worsening of the situation in Greece, but opinions changed over the past few weeks.
At a meeting with foreign investors mid-June, governor Mugur Isarescu said the central bank’s Board will try to resist and not reduce more the policy rate. The country will register negative readings of the consumer price index over the next quarters, but it won’t record deflation, the governor also said.
Romania’s annual inflation rate accelerated to a six-month high of 1.2% in May, but this was before the VAT cut for food products kicked in.