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The key interest will be reduced by BNR in February
The National Bank of Romania (BNR) will reduce the interest of monetary policy to 3.5% in the next meeting of the Board on issues of monetary policy on 4 February 2014, according to the estimates made by the Association of Financial Banking Analysts in Romania (AAFBR).A total of 15 out of the 20 participants to the survey estimated the reduction of the interest to 3.5%, while the rest see as a possibility the present level of 3.75%.
This could be the last reduction of the interest in a cycle of relaxation of the monetary policy which started in July 2013, most estimates for the horizon December 2014 showing an interest of 3.5%. The estimate for December 2014 varies between a minimum f 3% and a maximum of 4%.
The compulsory minimum reserves for liabilities in lei could be kept at 12% in February and reduced to 10% by the end of the year. The estimates for December 2014 vary between a minimum of 5% and a maximum of 12%. The compulsory minimum reserves for liabilities in foreign currency could be kept at 18% in February and reduced to 15% by the end of the year. The estimates for December 2014 vary between a minimum of 10% and a maximum of 18%.
Iancu Guda, member of AAFBR Business Information & Debt Collection Manager Coface: the interest on the interbanking market dropped significantly for all maturities, due to the portfolio investments at the beginning of 2013 ( 3.1 billion euro, almost as the whole level of 2012)helped by the inclusion of the Romanian bonds in Barclays and JP Morgan indicator at the beginning of 2013. The ROBOR indicator – one month dropped from 6%, the level of beginning 2013 to almost 2% at the end of the same year, and at mid-January to drop to 1.41%. Thus, the excess of liquidity increased significantly in November and December, as the public expenditure was financed through bonds in euro. Despite this, BNR did not need to initiate actions for the excess of liquidity, as the feeling of the investors towards the bonds was positive towards the end of 2013. The interest of monetary policy can be reduced to 3.5% until the end of the first quarter and reductions at the level of compulsory minimum reserves cannot be excluded, but they are unlikely. Thus, inflation pressure expected for the second half of the year will calm down the measures of monetary relaxation of the central bank.
Dorina Cobiscan, member AAFBR Analyst Macro Research and Bonds , BCR : The National Bank of Romania could continue the cycle of relaxation of the monetary policy in the meeting at the beginning of February. The interest of monetary policy could be reduced at 3.5% from the present level of 3.75%. The compulsory minimum reserves for lei could be reduced at 10% while the ones for foreign currency could be kept as such (18%). I estimate the annual rate of inflation will fluctuate to the minimum ( 2.5% +/- 1 point) in the first half of the year. As a result, the inflation pressure which drops, the improvement of the inflation estimate and low creditation are the main factors which could explain the decision in February.
Rozalia Pal, vice chairman AAFBR, head economist Garanti Bank: The annual inflation in January will be under 1%and will stay low in the first part of the year. This inflation environment will allow the National Bank to relax the monetary policy, stimulating creditation in lei by keeping interest low.