Romania's Central Bank (BNR) increased on Wednesday the monetary policy interest rate 0.5%, up to 7.5%, in order to reduce the inflation.
Taking into account the rapid growth of credits, the Central Bank decided to maintain the current obligatory minimum reserve for banks (20% for the Romanian Leu - RON - and 40% for convertible currencies), despite the fact that the European average for such reserves is 2%.
The 4% inflation target is jeopardized due to price growth pressure, prolonged drought effects and the high inflation rate in September.
According to BRD chief-economist Florian Libocor, the decision eliminates the possibility to have a weaker national currency in the following months. Still, Libocor believes that the measure may be good for the inflation, but not for the foreign trade deficit.
Even more, the inflation target can no longer be reached, predictions for the end of the year indicating a higher inflation rate than the 4% scheduled.