NBR leaves key rate unchanged fearing inflation

The NBR (National Bank of Romania ) decided yesterday in its first monetary policy meeting to leave unchanged both the key interest rate, which has remained set at 6.25% since May 2010, and the minimum reserve requirements, preferring not to send out signals for a lending revival and for a reboot of the recession-mired economy.

The economy has been unable to get back on its feet in the last 29 months, with Romania being one of the few countries in Europe not to record economic growth. In two years the economy lost over 30 billion euros of its GDP (Gross Domestic Product), with over 20,000 companies whose businesses amount to over 11 billion euros becoming insolvent.

NBR officials justified their reluctance to cut the key interest rate citing the risk of encouraging exchange rate speculations against the RON, and saying the measure would not have any major effects on loan interests.

The exchange rate has been stable for several months, fluctuating between 4.2 and 4.3 RON/euro, with interests on RON-denominated deposits ranging between 6 and 8.5% a year, while loan interest rates range from 11 to 18%.

Analysts anticipated this NBR decision, with inflationary risks remaining in the following period, especially as far as food and fuel prices are concerned.