BUCHAREST: Romania's central bank kept its benchmark interest rate on hold at a record low of 1.75 percent on Thursday at its first rate-setting meeting after Britain's vote to leave the EU and signalled its readiness to act if needed to defend stability.
The decision was in line with a unanimous call of nine analysts polled by Reuters. Four of them expect policymakers to hike rates by 25-75 basis points by the end of June 2017.
"The NBR is closely monitoring external and domestic developments and stands ready to use all its available tools during this period of heightened uncertainty in a bid to fulfil the overriding objective regarding medium-term price stability and to preserve financial stability," it said in a statement.
At 1010 GMT, the leu traded at 4.5210 to the euro, 0.1 percent firmer on the day and unchanged from levels just before the announcement. Analysts said the monetary authority was balancing the negative inflation environment with heightened risks following Britain's decision to leave the European Union and fiscal easing in an election year.
"This is referring chiefly to the Brexit," said Ciprian Dascalu, Chief Economist of ING Bank in Bucharest.
"But the detailed (central bank) statement is very likely to also mention potential fiscal slippages connected to an election year." Romania holds a parliament election sometime in December.
The bank has a 1.5-3.5 percent inflation target, but inflation is in negative territory driven by cuts in value added tax and other levies. Consumer prices fell 3.5 percent on the year in May after April's 3.3 percent decrease.
Governor Mugur Isarescu will detail the decision in a news briefing at 1200 GMT.
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