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BNR could reduce the key interest to 3.25% in the next 3 months and 3% by the end of 2015

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BNR could reduce the key interest in the next three months, from 3.5% to 3.25% and to 3% by the end of next year, consider the analysts in the Association of Financial-Banking Analysts in Romania (AAFBR), half of them anticipating a cut in the meeting on 4 August of the Board.

 

The Board of the National Bank of Romania decided on 1 July to keep the key interest rate of monetary policy at 3.5% per year and to reduce the rates of minimum compulsory reserves for the liabilities in foreign currency of the credit institutions, from 18% to 16% and for those in lei they were kept ay 12%.

 

The analysts consider, according to the opinions expressed in a domestic survey of the association, that the central bank could reduce the key interest to 3.25% by the end of the year, half of them considering that the drop could be decided in the Board meeting on 4 August, when the report on inflation will be approved.Moreover, the drop would continue during the next year so that it could reach the level of 3% by the end of 2015.

 

The next meetings of the Board of BNR following the 4 August one are programmed for 30 August and 4 November, the latter concentrating on the analysis and approval of the last report on inflation of this year.

 

The analysts estimate that the minimum compulsory reserves in lei could be reduced at 10% by the end of 2014 and 8% by the end of next year, while the RMO in foreign currency would be kept at 16% for this year, to drop to 14% next year, the most probably in December.

 

The BNR governor Mugur Isarescu admitted, after the board meeting of July that the central bank could decide on a new reduction of the key interest, as much as the dropping trend of inflation is a durable one. ‘It has been well positioned until now ( the rate of monetary policy interest, situated at 3.5%) we are in a process of consideration, not to say reconsideration to see in what measure the trend is a durable one’ Isarescu said.

 

The governor said that the Board members will take into consideration that the future decisions regarding the key interest have become negative in several countries, and the local banks hurry to reduce the interest rates for savings, not loans, when the BNR operates reductions of the interest rates of monetary policy.

 

We live in a period where several countries face financial repression, the one who saves is penalised in a way with negative interest rates. Personally – and I saw that the majority of the board members, not to say all of them, share this point of view – I don’t see it necessary, not to say inefficient or even dangerous, a slippage in the direction where Romania could discourage saving. It is a very important point of view in the monetary policy, the first thing I do is to reduce the interest rate for deposits, not loans’ the head of BNR said.

 

AAFBR is a professional, non-lucrative associatin, set up in January 2008, gathering 60 analysts in the banking, pensions funds, investment administration companies, insurance companies and capital market sectors.

 

 

 

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