Why did borrowing costs remain high?

Ana Sabiescu, 9 Sep 2009

Romanian version

Borrowing costs remained high throughout the summer, lenders showing timid rate-cutting attempts, despite the NBR governor’s estimates that Romanians would find better lending terms as they return from their summer vacation. Economists interviewed by Wall-Street expect interest rates to continue dropping, but at a different pace compared to deposit rates.

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Still room to maneuver on interest rates

“Deposit interest rates have significantly adjusted, and I expect commercial banks to cut them further, as long as the monetary policy rate will continue to drop”, Catalina Molnar, RBS Romania’s senior analyst told Wall-Street.

Deposit rates dropped more rapidly due to the cash flow into the money market from the central bank’s coffers, stabilizing the cash flow in the banking system while reducing monetary policy rate from 10.25% at the beginning of the year, to a current 8.5%.

“There is still room to maneuver on both lending and deposit interest rates”, RBS’ analysts concluded.

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