Economists: NBR is likely to ease lending rate
The policymaking group of the National Bank of Romania is likely to cut monetary policy rate further by 25 basis points, after 0.5% cuts in the previous sessions, on political tensions that increased pressure on exchange rates and put the disbursement of the third tranche under stand-by agreement with the International Monetary Fund at risk.
ING Bank Romania says the central bank may cut key rate to 7.75% and reduce the required reserve ratio for fx liabilities to 25% from current 30% and leave RRR for leu liabilities at 15%.
“We are back to the times when NBR’s decisions are not very relevant, same as end-2008-early 2009, because there is a big different between money market interests and key rate, due to a weak implementation of monetary policy and strong focus on exchange rates”, ING Bank said in a report. Under these conditions, ING bank expects NBR to allow a further devaluation of the domestic currency versus euro later this year or early 2010 in an effort to soften monetary policy in the real economy.
Ionut Dumitru, senior economist of Raiffeisen Bank expects a rate cut to 7.75% and reduction in reserve requirements for leu liabilities to 15%, citing political uncertainties that put leu under extreme pressure and IMF agreement at risk.
The central bank has cut the monetary policy rate five times year-to-date, from 10.25% to 8%, and reduced the required reserve ratio to 15% for leu liabilities and to 30% for Fx liabilities. The latest rate-setting session in 2009 is scheduled for November 3, when NBR will also pass the quarterly report on inflation.
Annual inflation rate fell in September to 4.94%, however, consumer prices increased by 0.39% month on month.
ING Bank Romania says the central bank may cut key rate to 7.75% and reduce the required reserve ratio for fx liabilities to 25% from current 30% and leave RRR for leu liabilities at 15%.
“We are back to the times when NBR’s decisions are not very relevant, same as end-2008-early 2009, because there is a big different between money market interests and key rate, due to a weak implementation of monetary policy and strong focus on exchange rates”, ING Bank said in a report. Under these conditions, ING bank expects NBR to allow a further devaluation of the domestic currency versus euro later this year or early 2010 in an effort to soften monetary policy in the real economy.
Ionut Dumitru, senior economist of Raiffeisen Bank expects a rate cut to 7.75% and reduction in reserve requirements for leu liabilities to 15%, citing political uncertainties that put leu under extreme pressure and IMF agreement at risk.
The central bank has cut the monetary policy rate five times year-to-date, from 10.25% to 8%, and reduced the required reserve ratio to 15% for leu liabilities and to 30% for Fx liabilities. The latest rate-setting session in 2009 is scheduled for November 3, when NBR will also pass the quarterly report on inflation.
Annual inflation rate fell in September to 4.94%, however, consumer prices increased by 0.39% month on month.