Perhaps some of the most frequently asked questions by those who chose the domestic currency for their banking deposits are: How will rates evolve? Will they keep dropping? Will they stay put? Will they post a slight increase? Many would find it difficult to answer these questions. Undoubtedly, the right answer lies in the monetary policy that will be applied by the National Bank from now on.
Whereas the rates took an obviously descending trend in the first three months of the year, both for deposits and for credits, analysts say we should not expect the same decreasing pace to keep up in the next period.
"We feel that passive rates (i.e. for banking deposits) have already hit the minimum level in terms of inflation expectations. However, it all depends on the monetary policy to be applied by the central bank. I for one believe the National Bank will enforce a more cautious rate cutting policy in the future, since one of its goals so far has been a narrower gap between financing costs in foreign currency and in ROL, favouring the ROL financing," said Radu Craciun, senior analyst with AB Amro Romania.
In fact, the same signal was sent by officials of the Banca Comerciala RomAâsna (Romanian Commercial Bank - BCR), Romania's largest bank. BCR says it is planning to maintain the current level of rates for population and corporate deposits in the next few months.
"I see no more rate plunges until the end of the year, as an appropriate level has been reached, at least for the next few months," said Nicolae Danila, BCR president.
At the end of April, BCR cut the rates paid to natural and legal persons by two percentage points, but it was among the last banks to make such a decision. Ever since February (and mainly in March), the other market leaders have operated periodic rate cuts.
For one-month deposits, rates now range between 10-12 percent yearly, while for the one-month maturity they revolve around 16-18 percent annually.
"I do not think we shall witness another rate cut for banking deposits in the next 3-4-5 months. As long as the central bank pays an average annual interest of 17-18% as part of its money market sterilisation policy (to reduce liquidity, i.e.), there are no reasons to cut the passive rates," says Cristian Sporis, chief dealer with Raiffeisen Bank Romania.
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