The persistent decline of non-governmental lending and RON'sappreciation trend against the euro have convinced the NBR to cutthe key rate by another 0.5% to 7% per annum, as most analysts hadalready anticipated.
The monetary policy rate therefore reverts to the all-time lowregistered in the summer of 2007, when the market was seeingmassive inflows of foreign currency and a record appreciation ofthe RON.
The central bank did not go for a greater relaxation of themonetary policy, citing "the persistent uncertainties related tothe international environment evolution, of the capital flows, ofcontrolled and volatile prices."
At the same time, it did not see fit to feed additional cashinto the market by reducing the level of reserves that banks arerequired to keep with the NBR.
Rates on the interbank monetary market had gone below 7% againbefore the NBR announced the key rate cut. The last few weeks haveseen highly volatile interbank interest rates, with the fluctuationinterval ranging between 3.5% and 9% for short maturities. The keyrate cut means that banks will be able to get overnight financingfrom the NBR at a lower cost, 11% per annum.
Most analysts deem yesterday's decision of NBR's Board ofGovernors as a "firm step" or as "an important jolt" forincreasingly cheaper RON loans.
On the other hand, BRD and ING's economists believe that the cuthas already been incorporated by the market, and the effect will begradual, so that the maximum impact will only be reached one yearfrom now. Even with the cuts operated by some banks lately,interests on RON loans are still higher than 10%, and theannualised percentage rate still will not go below 20%.
"It's too early to talk about one-digit interests for RON loans.It is largely dependent on whether the number of insolvency casesgoes down or not, on whether we have a clear perspective ofunemployment and whether the overall economy rebounds," says MihaiBogza, Bancpost chairman.
Petre Bunescu, deputy general manager of BRD, the second-largestbank on the market says NBR's interest is only a reference forbanks, which also have to take credit risk into account, asreflected in the increase in provisions.
"Restarting lending is not just a matter of interest rates. Theeffects of the crisis are the underlying issue: there are problemswith the individual clients, who are faced with a decline in incomeand some of them even with the possibility of unemployment,"Bunescu says.
On the forex market, the RON continued to go down slightly afterNBR's announcement: the benchmark exchange rate rose to 4.09RON/EUR and interbank rates went over 4.10 RON/EUR.
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