Romania’s Central Bank maintains key interest rate at 1.25 percent per year, although central banks in the region began raising interest rates

The board of directors of the National Bank of Romania (BNR) decided on Wednesday to keep the monetary policy interest rate at the level of 1.25 percent per year. The BNR decision comes in the context in which other central banks in the region, such as those in Hungary and the Czech Republic, have already decided to raise interest rates to keep inflation under control.

The BNR Board also decided on Wednesday to keep the interest rate for the deposit facility at 0.75 percent per year and the interest rate for the credit facility (Lombard) at 1.75 percent per year. At the same time, the NBR decided to keep the current levels of minimum required reserve ratios for liabilities in lei and foreign currency of credit institutions.

Last month, Hungary was the first country in the European Union whose central bank decided to raise key interest rates to keep inflation under control. The Czech Republic made a similar decision a few days later.

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While some of the world’s largest banks believe that the global rise in inflation is only a passing phenomenon, some of the central banks in Eastern European countries believe that an immediate response is needed.

Poland, meanwhile, said it plans to keep the key interest rate close to zero until its economy fully returns, Poland’s central bank governor Jerzy Zyzynski said on Wednesday, saying the country should give up inflationary fears. “This year and the beginning of 2022 are a serious test for our economy. The waiting approach, therefore, is all I can see until the economy reaches pre-pandemic levels, “he said, according to Bloomberg.

Against the background of the economic recovery, inflation is advancing worldwide. The US Federal Reserve (Fed), as well as the European Central Bank (ECB), have recently called it “premature” to raise interest rates and reduce support for the economy, in order to avoid overheating. But in Iceland, Brazil or Russia, central banks have already tightened monetary policy to fight inflation.