Romania's central bank kept its main interest rate unchanged for a fifth meeting as policy makers maintain a "prudent" stance to bring inflation back to its medium-term target.
The Banca Nationala a Romaniei kept the monetary policy rate at a record-low 6.25 percent, the Bucharest-based bank said in an e-mailed statement today. It halted the easing cycle in June after cutting rates four times to combat a recession. Today's decision was in line with the forecasts of seven economists surveyed by Bloomberg.
Romania, which took 20 billion euros ($26.3 billion) of loans from the International Monetary Fund and the European Union to stay afloat, raised the value-added tax by 5 percentage points to 24 percent in July, boosting inflation to the fastest pace in more than two years.
Inflation will be "close" to 8 percent at the end of 2010 from 7.7 percent in November and below the bank's on Nov. 4 forecast of 8.2 percent. The rate will probably end this year at 3.4 percent as the effects of the VAT increase dissipate, according to the November outlook.
The bank left its minimum-reserve requirement at 25 percent on foreign-exchange deposits and 15 percent on lei deposits. The leu kept gains versus the euro after the decision, trading 0.1 percent stronger at 4.2668 as of 5:30 p.m. in Bucharest.
The government, which survived four no-confidence votes in parliament last year over unpopular wage cuts and the tax increase, should stick to the terms of its international bailout and continue the "essential" implementation of fiscal consolidation and structural reforms.
The administration plans to narrow the budget deficit to 4.4 percent of gross domestic product from a preliminary gap of 6.6 percent in 2010 to qualify for bailout payments.
To contact the reporters on this story: Irina Savu in Bucharest at isavu@bloomberg.net.