COMPANY NEWS » NBR to cut minimum reserve requirements when market conditions appropriate

NBR to cut minimum reserve requirements when market conditions appropriate

• NBR sees a delayed and gradual economic recovery in the next quarters
• The new inflation forecast: 7.8% y/y in 2010 and 3.1% y/y in 2011
• The pass-through effect of the recent hike VAT to inflation is estimated at around 75% (+3pp); the balance is explained by the low level of households demand and the significant share of the peasant market that is not sensitive to fiscal developments
• The governor does not expect a resumption of the growth in households consumption based on consumer loans; banks should realize that business in the area of consumer lending will be fragile in the future and should look for alternative opportunities, like the co-financing of the European projects
• The monetary policy will not accommodate the recent increase in the inflation rate (in the context of the hike in VAT); at the same time, if the second round effects of the recent hike in VAT on the consumer prices are significant, the monetary policy will respond
• Future governments should learn from the mistakes of the past and should not follow procyclical fiscal policies
• NBR discourages a move of the EURRON FX rate to areas that are not suitable
• If the Ministry of Finance accepts higher yields at auctions for RON-denominated securities, this is likely to create a dangerous spiral (similar to the inflationary spiral)
• NBR encourages the Ministry of Finance to have a balanced approach between RON-denominatedand FX-denominated resources used for the financing of the budget deficit