Romania hikes key rate to fight inflation

EU

Romania’s central bank raised its key interest rate Thursday for the sixth time this year in a bid to fight inflation that is among the European Union’s highest.

The quarter-point hike pushed the monetary policy rate to 10.25%, keeping the cost of borrowing at a three-year high after consumer prices rose 8.6% in June. Prime Minister Calin Popescu-Tariceanu’s government, which faces November parliamentary elections, recently pushed through increases in retirement benefits and the minimum wage - moves that will increase inflationary pressure, local analysts said.

Curbing inflation is a key requirement for Romania to switch its currency to the euro, a goal the government has set for 2014. A restrictive monetary policy remains necessary under current economic conditions, the central bank said in a statement on Thursday’s rate hike.

Among the 27 EU members, only the three Baltic nations and Bulgaria have higher inflation, according to EU data. (m&c.com)

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