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Last update: Tue, 09 Feb 2016 10am
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Romania central bank holds rates at 5.25pc

dowsazxcsBUCHAREST: Romania's central bank kept its benchmark interest rate unchanged at 5.25 percent on Monday seeking to reconcile a weak economy with high inflation and a relatively weak currency.

 

Unlike Hungary, Poland and the Czech Republic which have cut interest rates to help their economies Romania has kept borrowing costs at 5.25 percent as inflation was at 4.6 percent in November, above the central bank's target band.

 

The bank has forecast end-2012 inflation at 5.1 percent, above its 2-4 percent target, mostly due to food prices. Analysts expect the economy grew 0.4 percent last year, less than initially estimated.

 

Meanwhile, debt yields have fallen and the leu currency has stabilised after a December parliamentary election gave the leftist government a landslide win.

 

But both remain vulnerable to potential new political tension between the government and rival rightist President Traian Basescu, as well as to a pending review of Romania's 5 billion euros aid deal led by the International Monetary Funds.

 

Investors will focus on negotiations for the country's third aid package once the current one expires in March.

 

MARKET REACTION

 

The Romanian leu traded virtually unchanged at 4.421 per euro at 1200 GMT, flat on the day.