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BNR cuts key interest rate to 6%

The Board of Directors of the National Bank of Romania (BNR) decided on Wednesday to reduce the key interest rate to the level of 6 percent from 6.25 percent a year, in effect starting on November 3, 2011.

The board also decided the proper management of liquidity in the banking system, maintaining the current levels of rates for the minimum mandatory deposits for liabilities in domestic and foreign currency of the credit institutions.

Analysts' Reactions

The central bank's decision to cut its main interest rate by a quarter-point to 6% comes rather late and its effects on bank lending might pass unnoticed, analysts said.

Key interest rate cut paves State's way to cheap loans

The cut in the monetary policy interest rate to 6 pct from 6.25 pct per annum decided by the National Bank of Romania (BNR) does not bring any change for the population and businesses overall, but will on the other hand allow the State to reduce spending with domestic debt interest rates, executive director of the Group of Applied Economics (GEA) Liviu Voinea on Wednesday told Agerpres.

'This reduction also sends a signal, because it comes after a long period of stagnation and is part of the overall prudent approach of BNR which proceeds to lowering the benchmark interest rate only after inflation dips more than 2 pct below the interest rate,' said the GEA executive director.

He added that 'BNR's decision does not fundamentally change the status of lending' because 'lending does not depend on the interest rate, but on the economic outlooks, the population and the companies' perception of their own capacity to repay a potential loan.'

'In these times the safety of a job and of an income counts most. When one can no longer take these things for granted, one doesn't venture any more to raise a loan, no matter how low the charged interest rate would be,' underscores Liviu Voinea.

In his opinion, the central bank's decision will have tangible effects on the interest for which the Romanian state can borrow money - 'it's a decision that supports the state's move towards cutting interest rates for the public domestic debt.'

'Commercial banks were borrowing money from BNR for 6.25% and then loaned the State for 7% and something. In recent weeks, the State was unable to borrow for less than 7%. Now, that the monetary policy interest rate was lowered to 6%, even if they maintain the same margin, towards the end of the year the banks will be loaning the State for less than 7%,' explains the GEA executive director.

Liviu Voinea considers that BNR might follow up this move in the coming months, by cutting the key interest rate by 0.25 percentage points in one or two steps.

The BNR Board decided on Wednesday to lower the monetary policy interest rate to 6 pct from 6.25 pct per annum beginning November 3, 2011.

Sursa: http://www.actmedia.eu

Tags: interest state bnr

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