Romania's Central Bank Raises Interest Rates

Romania's central bank raised its main interest rate, the European Union's highest, again today to 10.25 percent. The Banca Nationala a Romaniei raised the rate for the seventh consecutive policy meeting as it expects inflation to have accelerated in July from June's two-year high.



A drought last year destroyed a third of Romania's crops, adding to pressure from increasing global food prices and boosting inflation from a 17-year-low of 3.7 percent in March, 2007. The bank has now raised the key rate in stages from 7%.

The leu strengthened as much as 0.4 percent to 3.5138 to the euro after the announcement, from 3.5276 at closing yesterday. The benchmark BET stock index was little changed at 6045.04.


The central bank had previously predicted inflation may slow as early as August as an expected bumper crop counters rising food prices. Central banks in emerging economies, including Brazil, Russia and Turkey raised interest rates this month to stem the effects of surging oil and food prices. The European Central bank on July 3 raised its benchmark lending rate by a quarter point to 4.25 percent, the highest in seven years.

Several east European central banks, including monetary policy makers in Poland and Serbia, are taking stock of their moves to see if they hit their intended target. Slovakia held its main rate on Tuesday and the Czech Republic is expected to do the same next Thursday.

Romania's annual net-wage growth of 23.3 percent in May and a 63.4 percent increase in private lending in June have also pressured prices and boosted economic growth.