Tuesday, March 30, 2010

Romania cuts benchmark interest rate to 6.5 pct

BUCHAREST, Romania—Romania's central bank cut its benchmark interest rate to a record low of 6.5 percent Monday, the third time it has cut rates this year, in an attempt to revive the country's ailing economy.

The National Bank of Romania cut its main interest rate from 7 percent after slashing it from 7.5 percent in February and 8 percent in January. The interest rate reduction is also meant to stimulate lagging investment and consumption, which have shrunk during the recession.

In neighboring Hungary, the National Bank of Hungary also cut its main interest rate by a quarter percentage point to a new all-time low of 5.50 percent.

Romania received an International Monetary Fund-led bailout last year when its economy shrunk by minus 7 percent after three years of annual growth of about 8 percent.

The fund, which leads the euro20 billion bailout loan to the country which includes help from the EU and others, froze payments in November because of political instability.

Romania suffered its worst recession since communism ended in 1989 last year as booms in construction and commerce collapsed. The inflation rate fell to 4.5 percent last month from 5.2 percent in January as a stronger leu reduced the price of imports, gasoline, rent and other utilities that are measured in euros.

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