NBR interest rate is likely to remain unchanged after today's monetary policy session, according to analysts interviewed by ZF, amid the mounting inflationary pressures generated by the prolonged drought and the RON's recent correction.
Since the beginning of this year, the NBR's board of governors has decided during each session, to slash the interest rate; there have been four adjustments in all, cumulating 1.75 percentage points.
Analysts now expect the NBR to keep the interest rate at 7% per annum. In addition, the market also foresees possible adjustments related to the minimum compulsory reserves (at least for RON), as well as clarifications on the monetary policy operational framework. Since early July, the NBR has been purging the surplus RON on the monetary market through 2-week deposits instead of regular one-month deposits. "We expect the monetary policy interest rate to remain unchanged at 7% per annum, due to a worsening inflationary outlook, which makes easing the monetary policy again unjustified. Given the RON depreciation pressures witnessed in recent days, doubled by the worsening inflationary perspectives, the NBR is highly unlikely to continue cutting the interest rate," explains Ionut Dumitru, head of the research department at Raiffeisen Bank.
ING Bank analysts also expect the monetary policy rate is likely to be maintained at the current level.
In addition, NBR's board of governors is expected to approve the report on second quarter inflation. Analysts predict estimates on yearend inflation to be more pessimistic. The likely upward revision of inflation projections will make it difficult for the NBR to communicate a decision to cut down the monetary policy rate, says Ciprian Dascalu, senior economist with ING Bank.
BCR's chief economist, Lucian Anghel, does not rule out a new interest rate cut by a moderate 0.25%, but also says there are chances the rate could be maintained at the current level. Among the main reasons for a new interest rate cut Anghel names the positive trend of CORE2 inflation (which excludes volatile prices that cannot be influenced by the monetary policy anyway), the relatively low level of interest rates on the inter-bank market and the recent lending slowdown.
"We consider the easing of the minimum mandatory reserves requirements necessary (...)," Anghel adds. Florian Libocor, financial analyst with BRD-SocGen, also believes that the minimum mandatory reserves need to be reduced, but has limited expectations in this regard.
On the other hand, Dumitru says the NBR is likely to announce a change in the monetary policy operational framework today, with the central bank set to replace the main monetary policy instrument - deposits maturing in one month with a fixed interest rate with two-week deposits with variable interest.
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