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BNR reduced 0.5 points the monetary policy interest rate

BNR Board decided yesterday to reduce from 9.5 per cent to 9 per cent the monetary policy interest rate, starting on July 1, a press release remitted to the editorial office informs.

The National Bank of Romania also cut the minimum compulsory reserves by 5 points for foreign currency, to 35 per cent of the liabilities of the banks, and by 3 points for Lei, to 15 per cent. The reduction of the minimum compulsory reserves applicable to the liabilities in Lei of the credit institutions at the level of 15 per cent, and the decline of the minimum compulsory reserves applicable to the liabilities in foreign currency of the credit institutions at the level of 35 per cent will become applicable starting with the period July 24-August 23, 2009. BNR restates that it will use actively the market operations in view of an appropriate management of the liquidity from the banking system. "The National Bank of Romania will carefully monitor the domestic evolutions and those of the international economic circles in order to assure, through the adequacy of the available system, the achievement and the maintenance of the stability of prices on middle term and of the financial stability," reads the press release. BNR announced yesterday the third reduction of the interest rate this year, a process started in February, when it proceeded to a reduction of 0.25 percentage points, from 10.25 per cent to 10 per cent, followed by a new cut in May, from 10 per cent to 9.5 per cent, the first relaxation of 0.5 points in the last two years. Further to the decision, the interest rates for the Lombard credit facility decline automatically, from 13.5 per cent to 13 per cent this year, and the deposit facility from 5.5 per cent to 5 per cent, in the conditions in which they are established at plus/minus 4 percentage points against the key interest rate. In regard to the minimum reserves, the central bank opted for the elimination of the obligation to set them up also for the liabilities in foreign currency with a maturity over two years, starting with May. If the decision to cut the monetary policy interest rate from 9.5 per cent to 9 per cent - that the central bank levies from the banks for the injections of liquidity in the market through the repo operation - was expected, the simultaneous fall of the of the minimum compulsory reserves in Lei and foreign currency has surprised, the Money Channel shows. Actually, the fall of the key interest rate was necessary, according to economists, further to the deteriorations above expectations of the economic environment in the first quarter. According to an internal survey drafted by the Association of the Financial-Banking Analysts from Romania, 86 per cent of the participants estimated that the National Bank could cut the monetary policy interest rate further to the deterioration above expectations of the economic environment in the first quarter 2009.The analysts did not rule out a fall of the minimum compulsory reserves for the liabilities in Lei, in order to assure a permanent liquidity in the market. Thus, Radu Gratian Ghetea, president ARB, declared that towards the end of the year they will speak about a level of 7 per cent of the monetary policy interest rate, while Bogdan Baltazar, economic analyst, pointed out that the level could reach around 7.5 per cent at the end of the year. "Further to the reduction of the minimum compulsory reserves for Lei RON 3 bln were released, while through the fall of the minimum compulsory reserves for the liabilities in foreign currency the amount is EUR 1.3 bln. There are additional resources which can be used in the crediting activity," the chief economist of Raiffeisen Bank Romania, Ionut Dumitru, said, quoted by Mediafax. In his turn, Nicolaie Chidesciuc, senior economic ING Bank Romania, considers that the first signs of decrease of the interest rates for credits will be visible hardly in the third quarter, only if the National Bank continues to relax the monetary policy. The key interest rate established by the National Bank is now far from the minimum level from the last 6 years, namely 7 per cent, established in June 2007. In the Euro area, also on the background of the difficulties from the financial banking system, the monetary policy interest rate is now at the historical minimum of 1 per cent. The key interest rate of the Bank of England is also at the historical minimum of 0.5 per cent, while the Central American Bank, the Federal Reserve, has a fluctuating key interest rate between 0 per cent and 0.25 per cent per year.

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Tags: foreign reserves currency liabilities economic level bnr compulsory monetary points minimum policy interest romania national euro ing

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