The National Bank of Romania decided Monday to cut its monetary policy rate to 4.5 percent per annum from 5.0 percent, starting from August 6, the bank said in a press release.

This is the second cut in this year and came shortly after the central bank slashed the rate by 0.25 percent earlier in July.

It was a normal decision, given the downward trend in inflation, central bank governor Mugur Isarescu told a press conference after the announcement, adding that there is still "room" to reduce the policy rate.

In recent years, the central bank lowered the benchmark rate for 14 times from 10.25 percent in January 2009 to 5.0 percent in July 2013, in a move to revive the country's ailing economy.

The central bank has recently lowered its inflation forecast for 2013 to 3.2 percent from 3.5 percent and expects inflation will continue to decelerate in the upcoming period.

"The prospects for concluding a new precautionary arrangement with international financial institutions are seen consolidating the stability of the macroeconomic framework and boosting structural reforms, thereby strengthening the resilience of the domestic economy to external shocks," the central bank said in the release.

Romania last week reached a fresh 2-year precautionary stand-by agreement worth 4 billion euros with the International Monetary Fund (IMF) and the new agreement is to be approved by the IMF Executive Board this fall.

Isarescu expressed the hope that the key rate cut will be reflected soon in the loan interest rates of commercial banks in the country.

The bank reiterated that it will closely monitor domestic and global economic developments so as, via the proper calibration of the monetary policy conduct and the adequate use of its available tools, to ensure price stability over the medium term and financial stability.

Global Times