Credit Europe Bank analyst Georgiana Constantinescu says this was the final monetary session when NBR could have changed the rate, therefore it is more likely for the 10.25% threshold to be kept until January 2009.
“Inflation is not justifying a new raise of the benchmark interest rate and the high interest on the interbanking market could have triggered problems for the liquidity level. As of January 2009, we might see a relaxation of the monetary policies, if inflation path remains unchanged, considering the favorable basic effect” Georgiana Constantinescu pointed out.
UniCredit Tiriac Bank’s senior economist Rozalia Pal (photo) considers an upkeep of key interest in the following monetary session and says the Thursday decision of the monetary authority met the market and analysts’ expectations.
“Short-term inflationary projections have improved, and food prices will drop in the following period. The central bank had no reason to raise the lending rate, as in the actual market conditions, it would have led to a much-restrictive monetary policy” Rozalia Pal stated.
However, UniCredit Tiriac Bank’s economist sees a cut in benchmark lending rate merely after next year’s first half, based on a rout caused by economic growth which supports a strong aggregate demand.
“We have an economic growth which will lead to demand in excess, which lays pressure on price level. So far, inflation backed down based on offer, whereas on the demand segment there is an inflationary risk that must be controlled, until a drop in consumption rate is noticeable”, Rozalia Pal added.
However, analysts do not exclude a possible increase of lending rate at the latter monetary session in 2008, if inflation will not carry on its downside path.
“If there won’t be any deflation in September, then we can talk of another raise of lending rate in the next monetary session of the central bank, whereas I believe the new lending conditions enforced by NBR to slow down consumption. Nevertheless, the fast-paced economic growth is even more dangerous” Ella Kallai, Alpha Bank’s senior economist stated to NewsIn.
Moreover, Kallai says a raise of the lending rate might have led to a big rout in the market which is already fragile to the gloomy international context.
“International financial turmoil dents Romania as well as the rest of the emerging states, and a new shock inside the country would be too much. Central bank adopted a good strategy of lending rate management.” Kallai pointed out.
NBR board decided on Thursday to keep the benchmark lending rate at 10.25%, according to analysts’ forecasts and left the compulsory minimum reserves level unchanged.
The decision comes after six successive raises of key-interest carried out in October 2007-July 2008 interval, the monetary lawmaker raising the interest by 3.25%, from 7% to 10.25%.
In August, annual inflation slowed down to 8.02% from 9.04% high in July.
Translated and adapted by Camelia Oancea.
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