The NBR (National Bank of Romania) will increase the key interest rate for RON by at least half a percentage point today, to 8.5% a year, and is expected to continue to apply a moderate increase. The market will also see new measures to slow down foreign currency-denominated credits, after Governor Isarescu recently talked of using "steel swords" to combat the inflation target. Eight analysts polled by ZF said the NBR would be forced to increase the interest rate to at least 9% a year in the coming months, after annualised inflation is forecast to reach 7%-8% in spring. The significant pressures for RON depreciation in January also justify a more rapid interest rate increase. Although most analysts believe that the NBR will choose to maintain a gradual approach, there are voices that have drawn attention to the fact that a mere half a percentage point increase could be considered a "disappointment" by some investors, thus leading to additional pressures for a weakening of the RON. The NBR, however, could also directly intervene on the forex market, to correct the potentially alarming exchange rate evolution. Lucian Anghel, chief economist with the BCR (Romanian Commercial Bank), believes the monetary policy rate will increase by at least half a percentage point. "The annualised inflation will probably reach 7% in January, and continue to go up in March and April as a result of the base effect. This could create a prices-salaries inflationary spiral, which the NBR fears and with good reason," explained Anghel.
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