The National Bank of Romania made several important decisions on Tuesday. The first concerns the increase in the monetary policy interest rate to 6.75% per year, from 6.25%. The Central Bank also increased the interest rate for the lending facility, as well as the deposit facility interest rate. The Central Bank decided to maintain a firm control over the liquidity on the monetary market and to maintain the current levels of the mandatory minimum reserve rates for liabilities in lei and in foreign currency of lending institutions. At the beginning of this year, the key interest rate was standing at the level of 2% per year.<\/p>\n
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The increase is explained by the fact that the increasingly expensive electricity and food raised inflation, in September, to almost 16%, above the forecast level, says the National Bank. Inflation is expected to increase towards the end of this year again, to then take a gradual downward trajectory. It will drop below 10% only in the first semester of 2024, Central Bank experts predict.<\/p>\n
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The Central Bank increased the monetary policy interest rate by 0.5 percentage points, taking into account the increase in inflation and the regional context, according to economic analyst Constantin Rudni\u0163chi:
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I think that the situation in Central and Eastern Europe was also taken into account. Many central banks in neighboring states have already increased the interest rate more than Romania and, of course, if you have a higher interest rate, that national currency is more attractive. And here I am thinking about Poland, Hungary and, of course, the global context is not to be neglected at all, because it is clear that you cannot stay out of this game if, as it happens, interest rates are rising all over the world, from the United States to the Eurozone and then the National Bank also joins this trend and obviously it’s normal to do that.<\/p>\n
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On the other hand, there is also good news, in Rudni\u0163chi’s opinion, namely that the new increase in the key interest rate will not produce major effects in terms of interest rates in the interbank market, which are already above the level announced by the Central Bank. Constantin Rudni\u0163chi believes that the current increasing interest rate trend does not benefit at all people or companies who have credits or who want to take out a loan.<\/p>\n
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\nThe evolution of inflation is marked by high uncertainties associated with schemes for capping and compensating energy and fuel prices, the escalation of the war in Ukraine and the associated increasingly severe sanctions. The inflation equation also includes, according to the NBR, the level of absorption of European funds, especially from the NRRP, and the fiscal policy, against the background of the excessive deficit procedure and the general tendency to increase the cost of financing. In its estimates, the Central Bank reconfirms the significantly higher than expected increase in economic activity in Romania in the second quarter of this year, but indicates a quasi-stagnation in the last two quarters of 2022. (MI)<\/p>\n
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