Key rate cutting cycle ends in February

In line with our expectations, on 4th February the National Bank of Romania cut the monetary policy rate by a further 25bps to 3.50%. We consider that the key rate cutting cycle ended with this decision, but also that the easing of monetary conditions will continue until the end of the year.

The flash estimates indicate that Romania ended 2013 with a remarkable economic growth rate of 3.5%, much higher than anyone had estimated. At the same time, the current account deficit adjusted significantly in 2013, from around 4.4% of GDP to around 1.0% of GDP.

The RON lost ground against the single currency in February, negatively influenced by political turmoil in Ukraine and increased political noise between members of Romania’s coalition government that ended with the split of the coalition. The Ministry of Public Finance raised a lower amount than planned through the issue of treasury securities, in some cases the bids at the auctions being rejected.    

Florentina Cozmâncă
Senior Economist
The Royal Bank of Scotland plc, Edinburgh, Romania Branch