Romania's central bank cuts key interest rate
06 January 2010
Romania's central bank unexpectedly cut its main interest rate on Tuesday from 8 per cent to 7.5 per cent as it tries to revive a weak economy and keep inflation in line with midterm targets.
Romania has been mired in a deep recession, with the IMF predicting a 7 per cent contraction in the economy in 2009. The central bank says demand for loans is still low due to the downturn.
The country's annual inflation rate in November 2009 was 4.95 per cent, lower than the month before and significantly weaker than in Dec. 2008, when it was 6.3 per cent.
Economic analyst Ilie Serbanescu said he doubted private banks would decrease their interest rates after the central bank's decision.
The national currency, the leu, made slight gains against the euro Tuesday. One euro traded at 4.2077 lei, compared to Monday's rate of 4.2265.
The International Monetary Fund, the European Union and the World Bank put together a EUR 20 billion ($30 billion) package in March to help Romania during the economic turmoil. But a EUR 1.5 billion IMF instalment was put on hold in the autumn due to a political crisis in Romania in which the approval of the 2010 budget was delayed.
The parliament is expected to approve the budget this week. The IMF said the 2010 budget must be based on an agreed deficit of 5.9 percent of GDP and demanded that progress be made "on key pending structural reforms," such as the pension reform and the fiscal responsibility law
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