Bancherul - BANCI / ENGLISH / National Bank of Romania maintains the monetary policy rate at 10.25 percent

PRESS RELEASE

In its meeting of October 30, 2008, the Board of the National Bank of Romania has decided the following:

� To maintain the monetary policy rate at 10.25 percent per annum;
� To pursue liquidity management so as to ensure an adequate functioning of the interbank market;
� To reduce the minimum reserve requirement ratio on leu denominated liabilities of credit institutions to 18 percent from 20 percent starting with the November 24-December 23, 2008 maintenance period, and leave unchanged the existing minimum reserve requirement ratio on foreign currency-denominated liabilities of credit institutions.

The NBR Board has examined and approved the quarterly Inflation Report, which assesses the recent macroeconomic environment and the inflation outlook, and identifies the main challenges and risks to monetary policy in the coming period. The Inflation Report will be released to the public in a press conference scheduled for November 3, 2008.

The analysis of the latest macroeconomic developments indicates a continuation of the disinflation process and the maintenance of high economic growth throughout 2008, underpinned by the expansion of both investment and consumption. At the same time, the deepening of the financial crisis on global markets has triggered uncertainties surrounding the world economic outlook and the implications on the Romanian economy.

The inflation rate dropped to an annual 7.3 percent in September from 8.02 percent in the previous month, after the peak of 9.04 percent in July. The adjusted annual CORE2 inflation rate � calculated by excluding the impact of administered and volatile prices (vegetables, fruit, eggs and fuel) as well as the effect of vice tax � also fell to 6.7 percent in September from 7.4 percent in August.

These developments came against the background of tighter real monetary conditions, as well as due to a favourable base effect recorded in the prices of some certain food items.
Wage dynamics have continued to outpace productivity gains.
The growth of real credit to the private sector exhibited further signs of moderation in the context of a more significant deceleration of foreign currency-denominated loans. This occurred as an effect of constraints related to higher external financing costs amid marked volatility on world financial markets, of a continued trend of gradual reduction in excess liquidity in the banking system and of the central bank shifting towards a creditor position in its relation with credit institutions.

The past successive monetary policy rate hikes along with the prudential measures adopted by the NBR over time have ensured the conditions for an orderly moderation in non-government credit growth.

Nevertheless, the annual inflation rate will remain in the upcoming period above the upper limit of the variation band around the 2008 target.

Macroeconomic risks associated to the disinflation process, especially those related to incomes policy and to increased budget spending, remain on the upside in the context of heightened uncertainties related to the impact of the global crisis on financial markets. In such circumstances, the maintenance of a firm monetary policy stance as well as a consistent support from the other components of the macroeconomic policy mix are required.
In light of the available data, the NBR Board has decided to keep the monetary policy rate unchanged at 10.25 percent per annum. This measure will ensure the consolidation of its positive level in real terms, in line with the achievement of medium-term disinflation objectives in a sustainable manner.

The NBR Board has also decided to lower the minimum reserve requirement ratio on leu-denominated liabilities of credit institutions to 18 percent from 20 percent previously starting with the November 24 - December 23, 2008 maintenance period as well as to leave unchanged the existing minimum reserve requirement ratio on foreign currency-denominated liabilities of credit institutions.
This decision is aimed mainly at improving liquidity management on the interbank money market, amid renewed turbulences on world financial markets, with a view to ensure sustainable financing of the economy. The NBR will pursue liquidity management so as to ensure an adequate functioning of the interbank market.

The NBR Board has examined and approved the quarterly Inflation Report, which assesses the recent macroeconomic context and inflation outlook, as well as the main challenges and risks to monetary policy in the coming period. This Report will be released to the public in a press conference scheduled for November, 3, 2008.

The NBR Board will continue to vigilantly monitor domestic and global economic developments in the context of the ongoing international deleveraging process, of increased risk aversion by investors and of difficulties in assessing the duration and effects of the international financial crisis.

The NBR Board is restating that it will continue to manifest the utmost vigilance in fulfilling its objectives in what concerns price stability as well as ensuring financial stability.
The next NBR Board meeting dedicated to monetary policy issues is scheduled for January 6, 2009.