The good news: the National Bank of Romania (NBR) has operated a new cut of the intervention rate, which could lead to a slight decline in the interest on credits.
The bad news: the NBR raised the minimal mandatory foreign currency reserve rate, which should see banks up interests on foreign currency.
NBR operated a 0.75% cut of the intervention interest, so that it now stands at 19.25%. "During its meeting on August 5, the National Bank of Romania's Board, analysed the overall macroeconomic developments and decided to cut the intervention interest rate by 0.75% to mirror the continuation of the inflation curbing process. The National Bank will maintain a prudent monetary policy approach in view of ensuring further macroeconomic balance. At the same time, the Board decided to increase the rate of the minimal mandatory foreign currency reserves attached to the foreign currency deposits to 30% in order to stimulate financial intermediation in the domestic currency, as well as to properly manage the risks across the credit institution system," the NBR announced.
The intervention interest is the rate at which NBR attracts deposits from banks. This is the third rate cut NBR has operated in two months. Each time, NBR's announcement of a cut was preceded by a statement of Finance Minister Mihai Tanasescu about the need to cut rates, considering the inflation curbing results. Inflation is now standing at 0.3%-0.6%/month, which makes for an annual inflation of 3.6%-7.2%. On the other hand, interests on ROL maintain rather high, which shows a certain amount of imbalance still persists in the economy. The banks are offering 12%-16% a year for deposits and charge 20%-35% a year for loans. It is unlikely that banks would offer a visible cut of the interests on credits, and if they do, the decrease will be somewhere between 0.5%-1%. The deposits will probably see a slight decline within the same limits, as well.
The high interests rates for ROL and the stability of the euro and dollar exchange rate against the domestic currency have made companies and individuals go for credits in foreign currency.
cristian.hostiuc@zf.ro
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