Radio România Internațional

Tag: interest rate

  • National Bank of Romania maintains reference interest rate

    National Bank of Romania maintains reference interest rate

    The National Bank is maintaining its cautious attitude and will keep its monetary policy interest rate unchanged at 6.5% a year, in the context of domestic and international uncertainties. After two successive cuts, the reference interest rate has remained unchanged since August, amid efforts to bring down the inflation rate. The central bank says the inflation rose in the last quarter of last year more than expected. The Bank also decided to maintain the level of interest rates at which commercial banks can borrow from the National Bank or which they receive for deposits with the Central Bank at 7.5% and, respectively, 5.5% a year. The current levels were also maintained of the rates of the minimum obligatory reserves for lending institutions’ liabilities in lei and hard currency.

    Specialists are not surprised by these decisions, which they had anticipated, and believe the National Bank will continue to act cautiously so as to keep the inflation in check and not to hinder the otherwise low level of economic growth. Financial analyst Dragoş Cabat has more details:

    “The decision is absolutely normal given that we are going through a period of great uncertainty at home and internationally. Romania still has no budget, no plans to cut the budget deficit. Public debts continues to rise from one month to the next precisely so as to cover the budget deficit. Romania is also faced with a trade deficit. We don’t know whether taxes will go up and how public spending will decrease.”

    The inflation rate went up in the last months of 2024. The economic growth rate is very low, the war in Ukraine wages on and there is political uncertainty in the European Union in several important countries, says Dragoş Cabat. He believes the chances that the Central Bank may cut the monetary policy interest rate this year are quite low. The National Bank blames the increase in the inflation rate above expectations mainly on the rising cost of fuel, especially as a result of the appreciation of the US dollar on international markets, and less so on the rise in the cost of food, following a severe drought last summer. According to the latest data, the annual inflation rate will go down in the first quarter of 2025 but will still be higher than expected.

    The Central Bank’s experts emphasise that significant uncertainty and risks connected to the evolution of the inflation rate will be the result of the future fiscal and income policy, following the implementation of a recent package of tax and budget measures aimed at fiscal consolidation, as well as of the situation on the labour market and the wages dynamics. There will still be significant uncertainty related to the evolution of energy and food prices and the future quotation of crude oil amid geopolitical tensions. We recall that Romania ended 2024 with an inflation rate of 5.1%.

  • Inflation drops

    Inflation drops

    The annual inflation rate will continue to decrease in Romania at a sustained pace in the coming months, the National Bank estimates. The Central Bank officials say, however, that uncertainties and risks remain in the context of the war in Ukraine, and also of the fiscal policy in Romania, which should reconcile the need to reduce the budget deficit with support measures for the population and the economy. The Central Bank decided to maintain the monetary policy interest rate at the level of 7% per year, so that, in the coming months, loan interest rates should not increase. The amount of currency in circulation, the exchange rate, market interest rates, and other levers used to achieve economic policy targets depend on this indicator. It is the first meeting of the BNR management when the monetary policy interest rate is kept unchanged, given that it has continuously increased since November 2021.



    Financial analyst Adrian Codirlaşu says that the decision had been anticipated and that it would not have a significant impact on the interest rates charged by banks: Basically, no monetary policy decision has been made, which was widely expected by the markets too. Therefore, the impact on the evolution of interest rates on the money market is extremely low. We see that the money market interest rate is on a downward trend, but the ROBOR index will not drop below 6. Therefore, the long maturities might continue to decrease once the disinflationary process is confirmed. The consumer loan reference index – IRCC in this quarter is at its maximum value. As of the next quarter, there will already be a slight decrease, from 5.98 maybe to 5.93-5.94. It will not go significantly below 6 this year. It will probably decrease more next year, when the Central Bank will probably operate the first interest rate decrease.



    According to current assessments, the annual inflation rate will probably accelerate its decline in the coming months, but a series of uncertainties and risks persist. Adrian Codirlaşu mentioned the two main ones: The war remains a main risk, which can still bring negative surprises in this region or even in the whole EU. OPEC Plus, i.e. OPEC plus Russia, announced that they are reducing the amount of oil, with the aim of increasing the price on the international market. This will be reflected in inflation if the price remains high, or, if this operation succeeds and the price of oil really increases. So, the energy issue remains a vulnerability, not to mention the uncertainties related to war.



    Uncertainties and risks are also generated by the turbulences in the banking systems in the United States and Switzerland, which could have adverse effects by affecting the economies of developed states and the perception of risk in Central and Eastern Europe, with an impact on financing costs. (LS)

  • February 5-11

    February 5-11


    Romanias president at the European Council in Brussels


    At the European Council in Brussels, the President of Romania, Klaus Iohannis, welcomed, together with other European leaders, the presence of the President of Ukraine, Volodymyr Zelenskiy, as further proof of European solidarity and unity and close coordination in support of the Ukrainian people in the face of the war started by the Russian Federation. In this context, the head of state emphasized the importance of maintaining the European support for Ukraine. He highlighted, at the same time, the solidarity showed by Romania, as a neighboring and friendly state, which has contributed both at humanitarian and economic level, as well as in terms of increasing connectivity, facilitating grain transport or supporting Kyivs European aspirations.



    Klaus Iohannis also defended the need to keep putting pressure on Russia, including by adopting additional sanctions. In another move, the head of state announced that he will continue the discussions regarding Romanias accession to the Schengen area and said that he would soon travel to Bulgaria, to start a series of joint actions at diplomatic level together with his counterpart.



    Klaus Iohannis: “Joining the Schengen area is important to me, to Romania and to the Romanian citizens. I dont want to link the discussion to a specific date, because, as we saw in December, such things cannot be tied to a certain date, because there are many European considerations here. Unfortunately, however, the decisions are also linked to some domestic policy issues in some member states. I believe that this is not good, but its something that cannot be ignored either. I discussed this matter with the president Rumen Radev and yes, we will also take joint action.”



    According to the head of state, Romania is not a source of migration and is not a transit country. Klaus Iohannis added, in Brussels, that the problem is a European one and Romania wants to participate in finding the best solutions. He also said that migration and Schengen are to different matters.



    Romanian stands by Turkey after the quake


    Romania has joined the international teams and sent two search and rescue crews to the areas heavily affected by the earthquakes that hit southern Turkey. There are almost 120 Romanian rescuers on the ground, accompanied by seven specially trained dogs, who have managed to save several victims so far. The head of the Department for Emergency Situations, Raed Arafat, has given assurances that the Romanian rescuers will help Turkey for as long as it takes.


    Raed Arafat: “Theyll stay there as long as it takes. If we need to exchange personnel or send logistical support further, this will happen quickly, with the support of our colleagues in the Air Force, in the hope that we will be able to save as many people as possible and, of course, provide the necessary support to the colleagues who are faced with an unprecedented situation”.



    Moreover, Bucharest has already approved support for Syria, which was also heavily affected by Mondays earthquakes. Romania will help with materials, clothing and food. In another move, the Ministry of Foreign Affairs has repatriated several Romanian citizens who were in Turkey and who requested this after the earthquake. The Romanian Embassy in Ankara announced that it stays in contact with dozens other Romanians in that country.




    The second Patriot system for Romania


    This week, Romania has received the second Patriot system out of a total of four contracted under the Air Force equipping program. According to the Minister of Defense, Angel Tîlvăr, the Romanian military are taking part in an intensive training program to be able to use these anti-aircraft defense systems. The official has stated that equipping the Air Force with Patriot systems adds “a robust, credible, interoperable and flexible air defense capability, intended to help fulfill the missions of the Romanian Army”.



    According to the Ministry of Defense, the latest generation of Patriot systems arrived in Romania for the first time in 2020, and this year the first stage of the equipping program will be completed. The delivery of the next two started last year and their testing and reception should be completed by the end of April. The first system delivered to the Romanian Air Force has performed, since 2021, specific anti-missile defense missions in the airspace of Romania and NATO.




    7% key interest rate


    After two years of record interest rates and 11 increases, the National Bank of Romania decided, like the other Central Banks in the region, to maintain the key interest rate at 7% per year. The Central Bank has also kept the current levels of the minimum reserve ratios for liabilities in lei and in foreign currency for credit institutions, i.e. those amounts that commercial banks are obliged to hold in the National Bank accounts. The National Banks decisions take place in the context in which the Bank expects the annual inflation rate to decrease faster than previously anticipated. The annual inflation rate fell slightly last December, reaching just over 16%. In addition, the Central Bank expects the indicator to reach a single digit in the third quarter of this year, amid the extension of energy price capping and compensation schemes. (MI)


  • The National Bank of Romania maintains the benchmark interest rate.

    The National Bank of Romania maintains the benchmark interest rate.

    After 11 consecutive increases in the monetary policy interest rate, between October 2021 and January this year, the National Bank of Romania – BNR maintained the key interest rate at 7% per year, as established in last month’s meeting. The BNR also kept the current levels of the minimum reserve rates against liabilities in lei and in foreign currency of credit institutions, i.e. those amounts that the commercial banks are obliged to hold in the accounts of the Central Bank. An explanation for the central banks decision would be that it expects the annual inflation rate to decrease faster than anticipated. The BNR experts now estimate that inflation will fall below 10% as early as the third quarter of this year and that it will register at the end of 2023 a value far below that previously anticipated one. The new statistical data reconfirm, on the other hand, the significantly higher than expected increase in economic activity in the third quarter of 2022.



    Under these conditions, the BNR’s decision was predictable, says financial analyst Adrian Codirlaşu: It is somehow in line with what is happening in the region. Poland has 6.75%, the Czech Republic has 7%, so similar inflations to Romania. Moreover, positive news came from the perspective of reducing inflation in the developed countries. I am referring to the United States, where inflation is decreasing quite quickly, to the European Union, where inflation has also decreased beyond expectations. And what is equally very important is that the price of methane gas has decreased. Now it stands somewhere at around 55 Euros per megawatt-hour. It was 340 Euros per megawatt-hour in August. This led to a substantial decrease in the price of electricity. Also, the price of cereals decreased. And this contributes substantially not only to the reduction of the inflation rate, but also to the recovery of industrial activity, thus to higher economic growth. Therefore, this lower inflation, which means less aggressive central banks in raising interest rates, combined with lower prices also leads to lower inflation rate and to improved economic growth projections.



    Given that most specialists anticipated the BNR measure, its effects on the interest rates charged by banks will be limited, believes Adrian Codirlaşu. According to him, the information was already included in the market interest rates, and the rates were already on a downward trend, one that will be maintained. What matters in this trend, apart from the anticipated decreases in the interest rate, is the liquidity in the market, says the analyst. And market liquidity increased substantially in the last quarter. The Romanians who have credits in lei with costs calculated according to the ROBOR index already notice a capping or even a slight reduction of this indicator. However, the war in Ukraine will continue to generate uncertainties and risks regarding the perspective of economic activity and, implicitly, the medium-term evolution of inflation, BNR experts warn. (LS)

  • January 10, 2022

    January 10, 2022

    Covid. The first cases of infection with the new strain of the coronavirus, called Kraken, have been confirmed in Romania. Specialists say that, although the number of cases of COVID-19 is on the rise again, there are no problems managing them, including those that require hospitalization, and the new variants of SARS-CoV-2 do not generate concerns about the severity of the disease. On the other hand, there have also been cases of double infection, with flu and Covid, and a 74-year-old woman diagnosed with Flurona, a term used by specialists to describe simultaneous infection with the two viruses, has died.



    Visit. The Romanian Minister of Defense, Angel Tîlvăr, accompanied by the Chief of Staff, General Daniel Petrescu, is on a formal visit to Poland today. The program includes bilateral meetings with the Polish Minister of Defense, Mariusz Blaszczak, with representatives of the leadership of the General Staff of the Polish Armed Forces, as well as with the soldiers of the Romanian air defense detachment Sky Guardians from the NATO Battle Group, deployed in Bemowo Piskie Training Area. According to the Ministry of Defense, the visit of the Romanian officials to Poland is proof of the excellent cooperation between the two countries, both bilaterally and within NATO. On Monday, Angel Tîlvăr and General Daniel Petrescu met with the Romanian soldiers stationed in the NATO military base in Pristina, Kosovo, who participate in the NATO KFOR operation. The officials from Bucharest also discussed the security situation in the region with the KFOR commander, Major General Angelo Michele Ristuccia (Italy).



    Meeting. Prime Minister Nicolae Ciucă had a meeting in Bucharest with the ambassadors to Romania of the Czech Republic, Halka Kaiserova, and Slovakia, Karol Mistrik, which was also attended by the representative of the Czech and Slovak minority in the Romanian Parliament, Adrian Miroslav Merka. During the discussions, aspects regarding the separation of the representation of the Czech and Slovak minorities in Romania into two distinct entities, with their own operating statutes, were examined. The importance of going through the appropriate procedural steps quickly to ensure an effective separation, which would allow the timely re-accreditation of the two distinct forms of representation and their participation in the next local and parliamentary elections, was emphasized. The meeting was a good opportunity to review the status of Romanias bilateral relations with the two countries, the Czech Republic and Slovakia. The parties appreciated the excellent level of bilateral dialogue and emphasized the importance of boosting economic cooperation.



    Interest. The National Bank of Romania might increase the reference interest rate again today, in the first board meeting this year. Financial analysts expect the key interest rate to reach 7%, from the current 6.75%. It is the highest level of the key interest rate in 13 years. A higher key interest rate would automatically lead to an increase in loan rates in lei. Increasing interest rates is the main means by which the National Bank acts to keep inflation under control, after a year with record price increases.



    Deficit. Romania recorded, in the first 11 months of last year, a record trade balance deficit: the difference between imports and exports exceeded 31 billion euros, according to official statistical data. Romanias international trade continues to be dominated by exchanges with the member states of the European Union, which hold over 72% of the total in the case of exports and approximately 70 percent in terms of imports. More on this after the news.



    Research. The year 2022 was the most satisfactory for most Romanians (54%) compared to 2020 (24%) and 2021 (22%), years strongly marked by the restrictions caused by the pandemic, according to data from a Reveal Marketing Research study . According to the research, with the regaining of more freedoms, Romanians became more relaxed and optimistic in 2022. Regarding the expectations for the new year, Romanians are the most optimistic about the improvement of their personal financial situation compared to 2022 (43%). At the opposite pole, the level of pessimism reaches the highest values ​​with regard to the direction taken by the country starting this year, the improvement of the countrys economic situation and the reduction of the level of corruption being perceived as difficult or even impossible objectives to achieve by 46%, respectively 67 % of respondents. Regarding the professional sphere, 23% of Romanians want to change their job in 2023, and 50% want to keep their current job. The study was conducted online between December 28, 2022 and January 1, 2023 on a sample of 1,005 respondents, and the maximum sampling error is +/-3.1% at a 95% confidence level. (MI)



  • A higher monetary policy rate in Romania

    A higher monetary policy rate in Romania

    The National Bank of Romania made several important decisions on Tuesday. The first concerns the increase in the monetary policy interest rate to 6.75% per year, from 6.25%. The Central Bank also increased the interest rate for the lending facility, as well as the deposit facility interest rate. The Central Bank decided to maintain a firm control over the liquidity on the monetary market and to maintain the current levels of the mandatory minimum reserve rates for liabilities in lei and in foreign currency of lending institutions. At the beginning of this year, the key interest rate was standing at the level of 2% per year.



    The increase is explained by the fact that the increasingly expensive electricity and food raised inflation, in September, to almost 16%, above the forecast level, says the National Bank. Inflation is expected to increase towards the end of this year again, to then take a gradual downward trajectory. It will drop below 10% only in the first semester of 2024, Central Bank experts predict.



    The Central Bank increased the monetary policy interest rate by 0.5 percentage points, taking into account the increase in inflation and the regional context, according to economic analyst Constantin Rudniţchi:


    I think that the situation in Central and Eastern Europe was also taken into account. Many central banks in neighboring states have already increased the interest rate more than Romania and, of course, if you have a higher interest rate, that national currency is more attractive. And here I am thinking about Poland, Hungary and, of course, the global context is not to be neglected at all, because it is clear that you cannot stay out of this game if, as it happens, interest rates are rising all over the world, from the United States to the Eurozone and then the National Bank also joins this trend and obviously it’s normal to do that.



    On the other hand, there is also good news, in Rudniţchi’s opinion, namely that the new increase in the key interest rate will not produce major effects in terms of interest rates in the interbank market, which are already above the level announced by the Central Bank. Constantin Rudniţchi believes that the current increasing interest rate trend does not benefit at all people or companies who have credits or who want to take out a loan.




    The evolution of inflation is marked by high uncertainties associated with schemes for capping and compensating energy and fuel prices, the escalation of the war in Ukraine and the associated increasingly severe sanctions. The inflation equation also includes, according to the NBR, the level of absorption of European funds, especially from the NRRP, and the fiscal policy, against the background of the excessive deficit procedure and the general tendency to increase the cost of financing. In its estimates, the Central Bank reconfirms the significantly higher than expected increase in economic activity in Romania in the second quarter of this year, but indicates a quasi-stagnation in the last two quarters of 2022. (MI)



  • Central bank raises reference interest rate

    Central bank raises reference interest rate


    The National Bank of Romania raised the key interest rate to 6.25%, which is above market expectations and the highest level in the last 12 years. The central bank is thus trying to tackle inflation. As a consequence, interbank rates based on which the rates of loans in lei with variable interest rates are calculated, will see an increase in the coming period, says the vicepresident of the Association of Investment Professionals in Romania, financial analyst Adrian Codirlaşu:



    “The National Bank of Romania is expecting the inflation to continue to rise and that is why it has raised the interest rate by 75 basis points, which is more than the market expected. The result will be that interest rates will continue to go up on the monetary market, namely ROBID and ROBOR. At the same time, the central bank is expecting a strong slowdown of economic growth. This means that there is a risk of technical recession in Romania in the coming period, so perhaps we will see GDP drop in some quarters compared with the previous quarter.”



    National Bank experts say the most recent data suggest a strong slowdown of economic growth in the third quarter compared with the previous one. Despite this, a significant increase in the annual dynamic of GDP will be recorded in this period at a time when private consumption is decreasing. Financial analyst Adrian Codirlaşu explains:



    “The National Bank of Romania is expecting a lower pace of economic growth, so we will still have economic growth, but it will be much lower that the initial estimates. The bank will next meet in November and well probably see a new increase then by 25-50 basis points. By the end of the year, the monetary policy interest rate will probably reach 6.50 or 6.75.”



    According to central bank experts, the annual inflation rate will probably continue to grow towards the end of the year, but at a slower pace, as a result of higher prices for natural gas and electricity, as well as food, amid the war in Ukraine and the prolonged drought seen by Europe this summer. The escalation of the war and the increasingly severe sanctions against Russia generate uncertainty and considerable risks to the prospects of the economy and, implicitly, the medium-term evolution of the inflation rate, the banks experts also say. They add that in the current context, a balanced combination of macroeconomic policies and structural reforms, including European funds, are essential for maintaining macroeconomic stability and consolidating the capacity of the Romanian economy to cope with unfavourable developments. (CM)


  • Central Bank tries to keep inflation in check

    Central Bank tries to keep inflation in check

    The National Bank of Romania (BNR) has raised its benchmark interest rate to 2% per year from 1.75%, and decided to further retain firm control over money market liquidity. This is the third consecutive meeting of the Central Bank Board, which focused on raising the benchmark interest rate, in an attempt to keep inflation in check, which followed a higher-than-expected upward path. Experts have estimated that interest rates on bank loans for individuals and companies will go up, just like the interest rates on deposits, which are still at a very low level. BNR has also decided to maintain the present levels of the minimum reserves interest rates.



    Dan Suciu, the Central Bank s spokesman, said on Radio Romania: “Unfortunately, inflation is worrisome, because we have witnessed increases of this indicator lately. This is not an issue only in Romania, but all over the world, being triggered mostly by the energy prices. We have all seen how the price of power, natural gas and fuels went up. This has a huge impact on the inflation index and it generates increases in other price categories. This is what inflation is, a general rise in prices. Unfortunately, the energy price accounts for more than 70% of our inflation index. The monetary policy decisions, taken by the Central Bank, such as the interest rate increase, have little effect on energy prices. However, what we are trying to do, which will be more visible in the second half of the year, is to anchor inflationist expectations, to alleviate the increase in the prices of other components. “



    According to the BNR, the economic activity slowed down its growth considerably in the third quarter of 2021 to 0.4%, from 1.5% in the second quarter. At the same time, the GDP went down more than expected in the third quarter, but was still high due to private consumption and the unusual high stock fluctuation. Moreover, the inflation rate in September only partially corrected its strong increase in the previous two months, and was stabile in October, thus keeping its level above the pre-pandemic one. According to a Central Bank communiqué, the recent decisions are aimed at decreasing and keeping the annual inflation rate in line with the stationary target of 2.5% (+/- 1%), in a manner likely to contribute to sustainable economic growth. (EE)


  • The Central Bank and the Economic Crisis

    The Central Bank and the Economic Crisis

    Cristian Popa, one of the members of the Central Banks board, stated on Thursday, at a financial debate organized by the Romanian Investor Relation Association (ARIR), that the main scenario taken into consideration by the bank is a gradual reduction of interest rates, without destabilizing the rate of exchange. According to Cristian Popa, the Central Bank takes measures meant to ensure financial stability, including that of prices, and the rate of exchange is perceived by Romanians as an indicator of stability, and that is why the bank pays special attention to it.



    Usually, a reduction of the interest rate is almost immediately followed by currency devaluation. Other countries, where the euro is less used, have no problems in this respect. In Romania, however, even the slightest depreciation is breaking news, so the Central Bank has to analyze carefully any decision to reduce interest”, the bank official explained. He also said that domestic savings, in the local currency, are important too, and this is something that the Central Bank does not wish to discourage, given that both the real economy and the Government rely on the bank deposits set by the population and companies.



    “We weigh carefully each and every decision, we do not want to make any hasty decision, that is why measures are taken gradually. However, the Central Banks board has decided, and that has no negative effects on rate exchanges or savings, to reduce interest rates in two stages, by dropping the monetary policy interest rate from 2.5% to 1.75%, in the past months. Therefore, the Romanian Interbank Offer Rate has dropped from 2.8% to 1.9%, which means that the financing cost for the real economy has diminished considerably Cristian Popa also said.



    In turn, the president of ARIR, Daniela Serban, has stated that, in order to keep investors trust and to encourage investments including in the capital market, maintaining macroeconomic balance is very important. “It will all depend on the future fiscal plans and on easing down on expenditure with salaries and pensions. Focusing the governing program on investment will allow economic recovery, Daniela Serban added.



    At the end of June, the National Bank of Romanias hard currency reserve registered a 1.8% drop as compared to the previous month, and the level of the gold reserve stood at over 103 tons. Currency reserves are worth approximately 35 billion euro, which, experts say, is more than enough, in normal conditions. Growing uncertainty at global level and the rapid drop in investors trust in emerging economies are the biggest threats to Romanias financial stability, as identified in a recent report drawn up by the Central Bank.



    One serious threat is the deterioration of domestic and international macroeconomic balances, against the background of the Covid-19 pandemic. With regard to Romanias economic development, European and international bodies estimate a drop of down to 6%, followed by a recovery of the GDP dynamics by 2021. (M.Ignatescu)

  • Romanian currency hits all-time low

    Romanian currency hits all-time low

    The Romanian currency, the leu, continues to decline against the Euro. After several consecutive increases, the single currency soared to an all-time record, the official, National Bank exchange rate for the first time exceeding the 4.7 leu ceiling.



    According to analysts, it is a temporary increase. On Monday, the exchange rate was 4.7081 leu for the Euro, down 0.23% since Friday. The national currency also lost ground to the US dollar and to the Swiss franc. Central bank officials say these are inconsequential fluctuations and should not be seen as signs of currency market instability.



    The National Banks strategy adviser, Adrian Vasilescu, noted that the impact is psychological, and that the Romanian currency only depreciated by 1 ban, the 100th subdivision of the leu, against the Euro. He also emphasised that the National Bank would only consider an intervention in case the depreciation exceeds 4-5%. Such fluctuations from one day to the next cannot reflect developments in the national economy, but rather the supply-to-demand ratio and the evolution of imports, Adrian Vasilescu explained:



    Adrian Vasilescu: “Importers brought Christmas-related commodities in Romanian stores, shops were full, people bought foreign products extensively, and now those importers exchange their Romanian-currency revenues to Euros, to pay their invoices.



    But, Adrian Vasilescu warned, apart from long-term, economy-related factors that lead to changes in the exchange rate, the currency market is also influenced by political statements. He argued however that investors do not make their decisions based on emotions, and they will very likely not see Romania as a high-risk country. Financial analysts also agree that the current fluctuations in the currency market are small and that there are no reasons to worry.



    Corneliu Cojocaru: “The Euro rises against the leu in very small steps. This is not an alarming occurrence, and it may get reversed at any moment. The causes are well known, we have a high demand for Euros in the market and a small supply. The high demand is understandable, considering that we import more than we export so Romania has a trade balance deficit. In other words, we pay more than we cash in, so naturally the Euro is in high demand.



    Economists believe an exchange rate that more properly reflects the actual Romanian economy is 4.75 leu for the Euro, and that the national currency may well continue to drop in the forthcoming period. ROBOR, the main index used in setting the floating interest rates for loans in the national currency, has also gone up again and is getting close to 3%.



    (translated by: Ana-Maria Popescu)

  • New measures from the National Bank of Romania

    New measures from the National Bank of Romania

    In their first monetary policy meeting in 2015, the Board of the National Bank of Romania decided to slash the monetary policy interest rate from 2.75% to a new historic low of 2.5%, starting on January 8th. The move proves the Central Bank’s consistency with regard to boosting lending in the national currency. In 2014, the National Bank reduced the monetary policy interest rate several times, bringing it down from 4% to 2.75%. Also in 2014, the Bank reduced the rates on minimum compulsory reserves, both in the national and in hard currencies, and the rates have stayed unchanged since.



    According to the Central Bank Governor Mugur Isarescu, the decision to reduce the interest rate was the result of a drop in the annual inflation rate, which went below the estimated values, following the decline in volatile prices and the low inflation rate in the Eurozone. Governor Mugur Isarescu:



    “In November 2014, the annual rate of inflation dropped to 1.26%, from 1.44% in October. Also in November 2014, the average annual rate of inflation was 1.1%, slightly lower than 1.2% as it had been recorded in the previous month. The average annual inflation rate, which is established on the basis of the Harmonised Index of Consumer Prices, an indicator of inflation and price stability also used to assess the convergence criteria in the EU, stood at 1.4%”.



    However, Romania’s economy needs other measures as well in order to get stronger. Mugur Isarescu again:



    “The National Bank of Romania’s Board believe that a proper mix of economic policies, in line with the provisions of the agreements on external funding, alongside a sustainable process of financial mediation and a proper remuneration of bank deposits, are essential for the consolidation of the Romanian economy and for rendering it stronger to external shocks.”



    The national currency’s exchange rate against the Euro was stable all through the year 2014, and the annual growth rate of crediting in the national currency went up, Mugur Isarescu also said. At the same time, though, the private sector did not benefit from loans as the credit stocks in hard currencies decreased, and a process was initiated to eliminate bad loans. Talking about the situation in Greece, the Governor said Romania must be aware of the threat it poses to its economy. However, Isarescu also stressed, the National Bank of Romania has the necessary tools to manage potential threats.