Romania central bank holds rates at 2.50%

Credit: REUTERS/Bogdan Cristel

Romania's central bank kept its benchmark interest rate unchanged at 2.50% as expected on Monday, as it seeks the balance between a widening current account deficit and high inflation.

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BUCHAREST, Aug 5 (Reuters) - Romania's central bank kept its benchmark interest rate ROINTR=ECI unchanged at 2.50% as expected on Monday, as it seeks the balance between a widening current account deficit and high inflation.

A loose monetary policy stance by the world's largest central banks has allowed rate-setters in Central and Eastern Europe to adopt a wait-and-see approach.

In Romania, inflation slowed to 3.8% on the year in June, slightly below expectations but above the bank's 1.5-3.5% target.

Analysts said inflation would come under further rising pressure later this year as the government mulls higher tobacco excise duties and a new levy on sugary drinks in efforts to keep the budget deficit under European Union limits.

But the central bank is weighing the need to rein in inflation and the firming of the leu currency should it raise interest rates.

In July, central bank Governor Mugur Isarescu said interest rates were high enough to stand out from other central and eastern European states, attracting temporary capital inflows and amplifying the country's external shortfall.

"The external environment works in the opposite direction, preventing a potential hike in the policy rate due to market expectations about a loosening of the ECB's monetary policy in September, which could boost capital flows towards emerging markets," Romania's BCR said in a research note.

"The central bank repeatedly mentioned in the past that it wants to avoid an unsustainable appreciation of the leu based on speculative capital inflows."

All analysts polled by Reuters had expected the decision.

The Romanian leu EURRON= was flat against the euro at 1030 GMT. Governor Mugur Isarescu will hold a briefing from 1200 GMT.

(Reporting by Luiza Ilie; Editing by Andrew Cawthorne)

((luiza.ilie@thomsonreuters.com; +4021 527 0312; Reuters Messaging: luiza.ilie.thomsonreuters.com@reuters.net))

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