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City Group thinks BNR should raise key interest over 9% to calm down the leu

The BNR monetary policy interest rate should grow to over 9% per year from 8% at present to be able to control depreciation pressures of the leu, City Group analysts consider, expecting a 0.5% interest rate increase in February.

“We expect the central bank to raise the monetary policy interest rate by 0.5% at the next meeting of the administration board on 4 February. Later harshening of the monetary policy will depend on the evolution of the leu and of prices. In our opinion, in case BNR does not respond to the increase expected next month and climbs to over 3.7 lei/euro, it may directly intervene in the currency market to stop the depreciation of the national currency,” City Group analysts estimate in a report referring to the evolution of emerging markets, published on Thursday. The study also shows that a more powerful tightening than the one estimated at present – 0.75% in February, may represent a more prudent answer to market conditions. On the other hand, experts note that BNR representatives have tried to stop the depreciation of the leu with recent comments. Deputy governor Cristian Popa declared on Wednesday that the depreciation of the leu is unsustainable and tighter monetary conditions are needed. On the other hand, BNR economist Valentin Lazea said that the central bank reserved the right to use other instruments besides the monetary policy interest rate, including direct interventions in the currency market. He also referred to the growing commercial deficit which makes Romania different from other east European countries. The deputy governor of BNR Eugen Dijmarescu made similar comments saying that “the central bank will make necessary efforts “ when he was asked whether the institution would take into account the interest rate increase to strengthen the leu. Sursa: http://www.actmedia.ro

Tags: monetary group interest bnr euro

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