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BNR explains why they kept the interest: the annual rate of inflation dropped in September

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The National Bank of Romania (BNR) announced on Wednesday that the decision regarding the rate of the interest of monetary policy at the level of 2.50% per year was taken in the context where the annual rate of inflation dropped in September at 3.5% and the new data confirm the slight deceleration of the GDP.

BNR announced on Thursday to keep the rate of monetary policy interest at 2.50% per year, being the 11th consecutive decision in this sense.

 ‘The annual rate of inflation IPC dropped in September at 3.5% from 3.9% in August, coming back to the superior limit of the interval for target variation. The evolution was due to the accelerated diminution of the annual dynamics of the volatile food prices and that of the fuel price’ the BNR report says.

At the same time, in the Wednesday meeting, the Board of BNR analysed and approved the Report on Inflation, November 2019, document which incorporates the most recent data and available information.

 ‘The new prognosis shows the perspective of placing the annual rate of inflation slightly above the interval of the target at the end of the current year, followed by the coming back and the keeping at the superior level of the interval, until the end of the prognosis horizon, on an inferior route to the previously estimated one.

The central bank draws the attention that the new statistics data regarding the economic growth in Q2 2019 confirms the slight deceleration of real GDP at 4.4% from 5% in the previous quarter ( annual variations).

 ‘According to the reviewed data, the contribution of the consumption of households  is majority, being followed by that of the gross formation of capital. By comparison to the previous version, the net export reduced its negative impact to the GDP dynamics, in the context of the accentuated restriction of the unfavourable gap between the dynamics of the exports of goods and services and that of imports. The evolution was found in the slowing down of the annual rhythm of growth of the negative balance of the commercial balance. The annual dynamics of the current account deficit was kept at the level of the previous semester, on the basis of the significant deterioration of the balance of primary income and that of secondary income’ the report says.

At the same time, uncertainties and growing risks at the address of the inflation perspective come from the future behaviour of the fiscal policy and that of incomes, especially in the context of the electoral calendar 2019 – 2020, and the level and trend of the current account deficit stay worrying, according to BNR.

 ‘Increasing uncertainties generate the most evident weaking of the economy of euro zone and that of global one, as well as the increasing of the risks at the address of their perspective, in the context of the commercial war and the Brexit. Quite relevant are the decisions of relaxation of the monetary policies of BCE and Fed, as well as the attitude of the central banks in the region’ the press release says.

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