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BNR will keep the monetary policy interest rate

BNR will keep on Wednesday the rate of monetary policy interest at a minimum of 6.25% as well as the level of the compulsory minimum reserves, the key word being caution until the economic situation clarifies and inflation pressure disappears, the economic analysts consider.

'My opinion is that the central bank keeps both the rate for monetary policy and the minimum reserves. As we saw in August, the effect of the second round ( VAT increase) on inflation is not consistent yet, but, unfortunately, the economic environment does not allow a reduction and until now the scenarios were to keep steady or to increase' the head-economist of BCR Lucian Anghel said .

The government increased since 1 July VAT from 19% to 24% to ensure a plus of income to the budget with a view to keeping within the budgetary deficit target as negociated with IMF – 6.8% for this year. The decision was taken after the Constitutional Court rejected the reduction of the pensions by 15%.

Anghel considers that he could talk about a drop in the key interest about mid-year when the basic effect of inflation is reduced. « It is hard to reduce the monetary policy interest rate when you have big inflation. Caution is the key word in BNR' Anghel said.

Consumption prices increased by 0.23% in August against July and the annual rate of inflation went up at 7.58%, the highest level of the last two years. The VAT increase by five percentage points had a significant impact on the prices in July which were increased at the first round by 2.58%.

'I tend to think that BNR will take attitude to wait and see what the impact of VAT increase is.There is no information about a possible move. We have to take into account the fact that BNR has to consult the IMF when taking a decision. After the visit in October of the Fund there will be more info and the things may be clearer' the head-economist of Raiffeisen Bank Ionut Dumitru said.

At the beginning of July, the head of the IMF mission to Romania Jeffrey Franks stated that the IMF expects the VAT increase to have one impact on prices, to dissipate gradually so that no persistent inflation pressure might exist.

The head-economist of ING Bank Romania Nicolae Chidesciuc says that it is early to increase the interest.

'Theoretically, the economic activity worsened after the announcement of austerity measures and there should have been a reduction, but the economy faces inflation pressures' Chidesciuc says.

He says that it is not about the drop ofmonetary policy interest rate and due to the fact that the fiscal policy is far from being balanced.

« If you have a reduction now, you could regret. You have to adopt wait and see. BNR has no available info and can't take a decision' Chidesciuc says.

The BNR board will meet on Wednesday to discuss monetary policy issues and in the session they will decide the level of key interest and that of compulsory minimum reserves applicable to the lei and foreign currency.

The previous meeting of 4 August the board decided to keep the interest at 6.25% as well as the rates for minimum reserves at 15% and foreign currency 25%.

The central bank dropped the interest rate during the first four meetings of this year from 8% to 6.25%.

Sursa: http://www.actmedia.eu

Tags: inflation increase bnr minimum interest monetary policy ing bcr bnr

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