Romanian National Bank's Board of Directors (BNR) decided to keep the key interest rate at 6.25% per year, as expected by analysts, and also to maintain the current levels of mandatory reserve, both in RON and in foreign currency.

However, International Monetary Fund (IMF) says monetary policy may be tightened later this year, due to inflationary pressures.

"It is the sovereign decision of the National Bank whether they should raise the rate or not, but I would say that in terms of making the decision on raising the rate, what we need to look at is not what's going on with the current inflation, but what we are expecting to happen with inflation in the following 12 to 18 months, because monetary policy takes a while to take effect", said Jeffrey Franks,the head of the  IMF delegation in Romania.

BNR will continue to monitor developments in internal and international environment, so that, through instruments at its disposal, to achieve and maintain price stability over a medium term and strengthen financial stability, according to the institution.

BNR cut the rate from 6.5 percent to 6.25 percent in May last year. In December 2009, the key policy rate was of 8 percent and was gradually decreased throughout 2010.

Irina Popescu, irina.popescu@romania-insider.com