Press release of the BCT Executive Board meeting held on 5 March 2018

The Central Bank’s Executive Board held its periodical meeting on 5 March 2018 and considered the different points outlined in the agenda.

After an in-depth analysis of trends in monetary aggregates and macroeconomic data, as well as in the national economic situation’s advanced indicators, the Board decided to raise the BCT key rate by 75 base points, bringing it thus from 5% to 5.75% per year.

This action has been decided to face up to the real risks of an ongoing inflation in 2018, having already posted 7.1% over February against 4.6% over the same month of 2017 and 5.3% on average in 2017.

An acceleration of inflation was recorded in the beginning of the current year in line mainly with the strong progress of the consumer price index over January 2018 by 1.1% (against 0.4% in December 2017).

In anticipation of this inflation speedup, the Executive Board has already decided, as at the end of December 2017, to widen the corridor to 100 base points on both sides of the BCT key rate, giving way to a marginal loan facility rate of 6%.

Following this significant action on the corridor, the money market rate rose to 5.61% in February 2018. This calls for an adjustment of the key rate with a view to ensuring a coherence of rates on the money market.

Moreover, a certain number of advanced conjunctural indicators, particularly the likely soaring of international commodity prices, mainly energy, foretell further inflationary pressure over the forthcoming period.

The Central Bank’s concern about preserving citizens’ purchasing power and favouring the conditions of a sound growth, the premises of which start to take shape in the very beginning of 2018, incites a proactive action through monetary policy tightening based on the interest rate as a privileged tool for a better allocation of financial resources.