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Isarescu: We have all reasons to lower exchange rate

Romania's National Bank (BNR) has all the reasons to lower the monetary policy exchange rate because inflation is 'climbing down' as well, but one must also consider the passive interest rates charged by the commercial banks, stated on Friday in Ramnicu Valcea (south), Romania's National Bank Governor Mugur Isarescu.

BNR official explained that the National Bank must watch inflation and interest rates applied by the commercial banks to deposits, which are supposed to be above the inflation rate and below the monetary policy rate.According to Isarescu, interest rates for population's deposits should be somewhere below six percent.

'The banks still have too high interest rates for deposits and are very cautious when they cut them. And for BNR it would be abnormal to take bigger steps. We are going to follow a downward trend gradually and the commercial banks would come below us for deposits and somewhere above for loans, if the current situation in terms of liquidity field continues.

Economy Must Be Allowed To Recover

Romanian central bank governor Mugur Isarescu Friday said the economy must be allowed to recover at its own speed, or the authorities might need to raise the taxes to aid the state budget.'Let's not forget that the bullet passed hissing close to our ears, but we haven't had tax increases, or at least the taxes that count weren't increased. Romania is now in its relaunch stage,' Isarescu told a banking seminar.

'Unless we have patience to let the economy recover, we might have to increase the taxes,' he added.

Romanian public debt must not be allowed to reach 60% of the gross domestic product, and the private debt should be kept in check as well, Isarescu said.'The crisis in Romania has started and then it was amplified by the private capital. An unresolved private debt becomes a public matter. Romania doesn't need an economic growth with large budget gaps, but a growth based on balanced consumption, investment and exports,' the central bank's chief said. Romania's public debt fell to 26.7% of the gross domestic product in January, from 29.3% in December 2009.

Romania Central Bank Likely To Cut Rate Again Monday

Romania's central bank is likely to cut its key monetary policy rate by another 50 basis points on March 29, economists said Friday, citing concern about low consumption and the leu's rapid strengthening against the euro. 'The adjusted CORE2 inflation dropped below 2%, which may allow trimming the key rate by over 50 basis points,' said Nicolae Chidesciuc, chief economist at ING Bank Romania.

The central bank cut its key rate twice so far this year, to 7% from 8% in December 2009. An additional 50 basis point cut to 6.5% would bring the rate to its lowest level ever.According to Chidesciuc, a further monetary policy easing will help stop the leu's appreciation over the next three to six months.

Ionut Dumitru, chief economist at Raiffeisen Bank Romania, expects a quarter-point reduction of the rate, saying the central bank is likely to take a more prudent approach on Monday.'I suspect the central bank will take small steps from now on and will trim the rate by 25 basis points each during the next two monetary policy meetings,' he said.Dumitru added the central bank will afterward keep the key rate at 6.5% until the fourth quarter, when it will ease by another quarter-point, depending on the inflation.

Romanian annual inflation slowed to 4.5% in February, faster than market expectations of 4.6% year-on-year, boosting scope for more rate cuts in the first part of the year.

The central bank targets inflation at 3.5% in 2010, plus or minus one percentage point.

Sursa: http://www.actmedia.eu

Tags: central romania isarescu inflation policy monetary ing bnr euro

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