BNR cuts key interest rate and mandatory minimum reserves, surprising the market

The key interest rate is now equal to that between February and March 2008, when BNR was practicing a severe monetary policy. Since the beginning of the year the rate was pushed down by 1.25 percentage points, from 10.25 percent to 9 percent.

The lombard interest will also shrink from 13.5 percent to 13 percent and the deposit facility rate will decrease from 5.5 percent to 5 percent. 

Minimum mandatory reserves stand now at 15 percent for lei passives and at 35 percent for foreign currency passives.

While analysts expected the minimum mandatory reserves to be kept at the old level or to be modified partially, the changing of the key interest rate was seen as necessary as the economic environment deteriorated over expectations in the first quarter. 

Napoleon Pop, member of the BNR board, declared that for lei passives the sum released into the market is of about 4 billion lei, while the total amount is of 9 billion lei. 

BNR now pays banks for minimum reserves annual interests of 5.11 percent for lei, 2.67 percent for euros and 1.07 percent for dollars.

The central bank also announced that it would keep using market operations to administer the liquidity in the banking system.