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Central Bank could keep key interest rate at 6pct

The National Bank of Romania's (BNR) Board of Directors will gather on Thursday in their first money policy meeting in 2012 to discuss the level of the key interest rate and this year's future macro-economic developments, the inflation included.

Analysts anticipate the Central Bank will not modify the key rate from the current 6 percent set at the BNR Board of Directors' last meeting held on Nov. 3, given there has been a weak reaction of the commercial banks to the signal sent by the BNR last year as to cutting the interests.

'We do not see an immediate movement by the commercial banks as regards the interest. The correlation between the interest rates between the Central Bank and the commercial banks exists, the communicated channels are functioning, but they have sometimes been weak', BNR Governor Mugur Isarescu had explained on Nov. 7, 2011, a week after the Central Bank's decision to cut the key interest rate 0.25 percent, i.e. to 6 percent from 6.25 percent.

However, it is possible the BNR could cut the minimum compulsory reserves rate applicable to the leu liabilities in a move meant as a signal to encourage resumed national currency crediting. No cut in the forex reserves rate is expected, since the outstanding forex lending repayment to the banks has constantly grown.

According to information supplied by the BNR, outstanding individual and company credit totalled 9.361 billion lei at end-Oct., by 2.17 percent more than in the prior month, while overdue forex loans repayment was in excess of the equivalent of 11.946 billion lei, a 3.9 percent rise. Leu credit totaled 80.859 billion lei (a 0.05 percent increase from Sept.), 43.708 billion lei of which was contracted by the economic operators and 35.45 billion lei by the population; forex lending amounted to a total 142.172 billion lei (a 0.34 percent drop), 71.93 billion lei of which was contracted by the companies and 68.96 billion lei by the individuals.

The BNR Board of Directors will also examine the quarterly report on inflation at Thursday's meeting.

Statistic figures show the year-on-year inflation rate dropped to 3.45 percent in Sept. from 4.25 percent in Aug., thus re-entering the variation band around the target after more than a year.

The adjusted basic annual inflation rate CORE2 recorded less significant drop to 2.72 percent in Sept. from 2.92 percent in Aug.

The deflationary process is predicted to strengthen in the months ahead, at the same time with the downwards adjustment of the inflationary anticipation amid maintained cautious conduct with respect to the monetary policy, the Central Bank says.

Sursa: http://www.agerpres.ro

Tags: percent billion bnr interest central

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