The National Bank of Romania's Board of Directors decided on Wednesday to keep the monetary policy interest rate at 6.5% per annum. The bank also maintained the lending facility rate at 7.50% and the deposit facility rate at 5.50%. The current levels of minimum reserve requirements for liabilities in both lei and foreign currencies remain unchanged.
This key interest rate has not changed since January 2023. The annual inflation rate rose unexpectedly in the last three months of 2024, reaching 5.14% in December, up from 4.62% in September. This increase was primarily driven by rising fuel prices, largely due to a significant appreciation of the US dollar in international financial markets, along with higher food prices influenced by severe drought conditions.
Economic activity stagnated in the third quarter of 2024, following a 0.1% growth in the previous quarter. Year-on-year, GDP growth improved to 1.2% in Q3 2024, up from 0.9% in Q2. Household consumption remained robust but slowed compared to Q2, while gross fixed capital formation continued its steep decline, hitting a nine-quarter low.
Net exports lessened their contraction impact in Q3 2024, as the annual change in import volumes decreased. Consequently, both the trade deficit and current account deficit showed a significant slowdown in their annual growth rates compared to the previous quarter.
Recent data indicate a moderate economic growth outlook for Q4 2024, aligning with prior forecasts, despite mixed developments in major demand components. Retail sales, particularly in the automotive sector, accelerated year-on-year growth in October, while construction work volumes sharply declined.
On the labor market front, employment figures increased in September and continued to rise in October 2024. Hiring intentions stabilized in the short term, although the labor shortage reported by companies intensified during Q4 2024. The annual growth of nominal gross wages and labor costs in industry saw a decrease in October but remained elevated.
Private sector credit growth continued to rise in the first two months of Q4 2024, reaching 8.8% in November, driven by increased housing loans. The share of lei-denominated loans in the private sector rose to 70.2% in November from 69.8% in September.