Romania Central Bank Eyes New Tools to Curb Top EU Inflation

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Romania’s central bank is considering broadening the range of tools it uses to fight the European Union’s fastest inflation, according to people familiar with the matter.

As a dovish mood takes hold globally, rate-setters in Bucharest have refrained from raising benchmark borrowing costs. They may now start offering commercial lenders the chance to place excess liquidity at the central bank for one or two months, according to the people, who asked not to be identified because the plans aren’t public.

Operations with a shorter term than the current weekly ones are also being considered, including overnight, the people said.

The yield on Romania’s local-currency government bond due in June 2023 rose one basis point to 4.19% as of 1:51 p.m. in Bucharest, rebounding from a two-month low. The leu reversed early losses to leave it little changed against the euro.

Romania is wary that raising interest rates will attract hot money from investors eager to find higher returns. While the Czech Republic has led the continent in lifting rates, Poland -- the EU’s biggest eastern economy -- is set to extend an unprecedented pause in record-low borrowing costs on Wednesday.

Romania’s central bank has instead sought to tighten monetary conditions by controlling liquidity. A hike in the benchmark rate this year can’t be ruled out if the strategy fails, Governor Mugur Isarescu said after last month’s decision.

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net;Irina Vilcu in Bucharest at isavu@bloomberg.net

To contact the editors responsible for this story: Andrea Dudik at adudik@bloomberg.net, Andrew Langley

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