Inflation drops
The Board of Directors of the National Bank of Romania - BNR decided to maintain the monetary policy interest rate at the level of 7% per year.
Mihai Pelin, 05.04.2023, 13:50
The annual inflation rate will continue to decrease in Romania at a sustained pace in the coming months, the National Bank estimates. The Central Bank officials say, however, that uncertainties and risks remain in the context of the war in Ukraine, and also of the fiscal policy in Romania, which should reconcile the need to reduce the budget deficit with support measures for the population and the economy. The Central Bank decided to maintain the monetary policy interest rate at the level of 7% per year, so that, in the coming months, loan interest rates should not increase. The amount of currency in circulation, the exchange rate, market interest rates, and other levers used to achieve economic policy targets depend on this indicator. It is the first meeting of the BNR management when the monetary policy interest rate is kept unchanged, given that it has continuously increased since November 2021.
Financial analyst Adrian Codirlaşu says that the decision had been anticipated and that it would not have a significant impact on the interest rates charged by banks: Basically, no monetary policy decision has been made, which was widely expected by the markets too. Therefore, the impact on the evolution of interest rates on the money market is extremely low. We see that the money market interest rate is on a downward trend, but the ROBOR index will not drop below 6. Therefore, the long maturities might continue to decrease once the disinflationary process is confirmed. The consumer loan reference index – IRCC in this quarter is at its maximum value. As of the next quarter, there will already be a slight decrease, from 5.98 maybe to 5.93-5.94. It will not go significantly below 6 this year. It will probably decrease more next year, when the Central Bank will probably operate the first interest rate decrease.
According to current assessments, the annual inflation rate will probably accelerate its decline in the coming months, but a series of uncertainties and risks persist. Adrian Codirlaşu mentioned the two main ones: The war remains a main risk, which can still bring negative surprises in this region or even in the whole EU. OPEC Plus, i.e. OPEC plus Russia, announced that they are reducing the amount of oil, with the aim of increasing the price on the international market. This will be reflected in inflation if the price remains high, or, if this operation succeeds and the price of oil really increases. So, the energy issue remains a vulnerability, not to mention the uncertainties related to war.
Uncertainties and risks are also generated by the turbulences in the banking systems in the United States and Switzerland, which could have adverse effects by affecting the economies of developed states and the perception of risk in Central and Eastern Europe, with an impact on financing costs. (LS)
