NBR stimulates the economy through a new interest rate cut

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Bogdan Tudorache

The National Bank of Romania (BNR) announced a further reduction of the monetary policy interest rate to 1.25 percent per year, from 1.50 percent per year, in a new attempt to stimulate the economy and lending.

Thus, the Board of Directors of the National Bank of Romania, meeting on Thursday, January 15, 2021, decided to reduce the monetary policy interest rate starting with January 18, 2021, cutting also the interest rate for the deposit facility to 0.75 percent per year, from 1.00 percent per year and the interest rate related to the credit facility (Lombard) to 1.75 percent per year from 2.00 percent per year.

In other news, the NBR decided to keep the current levels of minimum required reserve ratios for lei and foreign currency liabilities of credit institutions, as the market does not suffer from a lack of liquidity.

The NBR has successively reduced key interest rates during the pandemic to stimulate the economy. Thus, a first reduction of 50 percentage points took place in March of the previous year, after the monetary policy interest rate had been kept constant, since May 2018, at 2.50%. This was followed by a further decrease in June, with a smaller increase of only 0.25% to 1.75%, with interest falling again in August to 1.50%.

Prime Minister Florin Cîțu also welcomed the BNR’s position. “Very good news for the whole economy – the monetary policy interest rate has fallen. I congratulate the NBR for the decision to reduce the monetary policy interest rate from 1.5% to 1.25%. With this decision, the Central Bank confirms the decline in inflation in the medium and long term. At the same time, this decision represents the proof that the fiscal policy in Romania is no longer a destabilizing factor in the economy,” the prime minister wrote, on Facebook.

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