Why did borrowing costs remain high?

Lending rates and deposit rates practiced by commercial banks “will follow the same downward trend as the current account gap”, and Romanian borrowers will have the surprise of finding lower rates when they return from their summer vacation” NBR governor, Mugur Isarescu said in July.

Economists say fixed-deposit rates were cut, but probably not as much as the governor had expected.

As for the lending rates, things get more complicated, but analysts say there still a long time to wait to see a real reduction of interests.

“Deposits interest rates fell significantly, as the previous level was not normal. Interest rates for classic deposits in lei cannot be above the monetary policy rate. We shall see commercial banks cutting deposit rates further, until they reach a level below NBR’s benchmark rate”, Ionut Dumitru, Raiffeisen Bank’s senior economist told Wall-Street.

NBR’s monetary policy rate is currently standing at 8.5% while the highest deposit annual interest for a classic six-month deposit in lei is 11.5%.

“In general, deposit rates fell more rapidly than lending rates. There is a certain gap in the evolution of deposit and lending rates. When deposit rates stabilize, lending rates will be cut further”, Raiffeisen’s economist added.

NBR governor also said in July that “under current borrowing terms, it’s clearly we cannot have a credit demand”.

Interests for Fx loans dropped in the 12 months to June 2009 by less than 0.5basis points, while the six-month EURIBOR fell 4 basis points.