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Lending rates likely to drop after the monetary policy rate cut

This was the second consecutive cut in benchmark interest rates operated by the Board of National Bank of Romania, from 9pp to 8.5pp. The measure could primarily result in further reductions of lending rates and deposit rates at banks.

“The interest rates needed to be slashed, with the economy in the grips of a process of disinflation”, said Lucian Croitoru.

The disinflationary trend and the depressed economy have forced the “invisible hand” of NBR before. This year only, the central bank has cut the interest rates by a total of 1.75pp.

The annual inflation rate stood at 5.86pp in June down 0.09pp from May after hitting a record 6.89 pp in February 2009. Thus, the real interest rate dropped to 2.64% per annum.

The new rate of 8.5pp is effective as of today.

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