The National Bank of Romania decided to keep the monetary policy rate at 7.00 percent per annum

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Bucharest, January 12, 2024# RBJ (NBR, press release) – In its meeting of 12 January 2024, the Board of the National Bank of Romania decided:
>>>to keep the monetary policy rate at 7.00 percent per annum;
>>>to leave unchanged the lending (Lombard) facility rate at 8.00 percent per annum and the deposit facility rate at 6.00 percent per annum;
>>>to keep the existing levels of minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions.

The annual inflation rate posted a faster-than-expected decrease in the first two months of 2023 Q4, falling to 6.72 percent in November, from 8.83 percent in September, amid the continued slowdown in the growth rate of food and energy prices, as well as following the decline in fuel prices, under the impact of lower crude oil prices.

At the same time, the annual adjusted CORE2 inflation rate saw its downward trend steepen more than anticipated, shrinking to 9.1 percent in November, from 11.3 percent in September, against the background of more widespread disinflationary base effects, ebbing agri-food commodity prices and the measure to cap the mark-ups on basic food products, but also in the context of the slower dynamics of import prices.

The annual inflation rate calculated based on the Harmonised Index of Consumer Prices (HICP – inflation indicator for EU Member States) went down to 6.9 percent in November, from 9.2 percent in September 2023. Furthermore, the average annual CPI inflation rate and the average HICP inflation rate fell to 11.2 percent and 10.3 percent respectively in November, from 12.6 percent and 11.4 percent respectively in September.

Economic growth slowed down significantly in 2023 Q3, to 0.9 percent from 1.6 percent in the previous three months (quarterly change), yet to a lower extent than anticipated, which makes it likely for excess aggregate demand to narrow more moderately over this period compared to expectations.

In comparison to the same year-ago period, GDP growth rose marginally in Q3, to 1.1 percent from 1.0 percent in Q2, thus remaining modest from a historical perspective, as the change in inventories increased its already very strong contractionary impact, and the contribution of general government consumption became slightly negative. However, gross fixed capital formation saw a re-acceleration in its annual growth to double-digit readings in 2023 Q3, while household consumption posted an annual pick-up after the stagnation in the previous quarter. At the same time, net exports continued to exert a larger expansionary impact, given the further widening of the positive differential between the dynamics of exports of goods and services, in terms of volume, and those of imports, amid the latter falling more visibly into negative territory. Consequently, the trade deficit saw a renewed slightly faster annual decline, whereas the current account deficit posted further a significant year-on-year narrowing, albeit somewhat more modest than in Q2, given the slower pace of improvement in the primary income balance in Q3, on account of reinvested earnings.

The latest data and analyses point to a mild slowdown in the quarterly growth rate of GDP in 2023 Q4, implying, however, a more robust annual economic growth over this period than previously forecasted.

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