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Survey – BNR will keep the monetary policy interest of 10.25% but analysts do not exclude an incre

Analysts expect the same monetary policy interest kept at 10.25% per year in the central bank session on Thursday, 30 October but they do not exclude a new increase, as a signal for the inflationist pressures, due to the decision to increase salaries and pensions.

The effects of salary increases in education and pensions increases could lead to the deepening of the budgetary deficit over 3% of the GDP, will determine the National Bank of Romania to draw the signal about keeping the key interest at 10.25% per year, despite the slowing down of inflation, a tendency estimated by the end of this year , analysts say.

"Normally, we would expect a drop in the key interest, if the same conditions were kept. If as regards inflation, the trend is decreasing, we have an increase in salaries and pensions, which will affect the budgetary deficit" stated for NewsIn the head economist in Raiffeisen Ionut Dumitru.

He added that the decision of the central bank could be a signal for the prudent monetary policy, in the context of inflationist pressures growing for 2009, as a result of salary increase. Besides all, the head economist in Raiffeisen Bank relies on a reduction of the key interest during the first meeting of monetary policy of next year.

« Salary increases will put pressure on consumption at the end of this year. Without these increases, the Central Bank could think of reducing the monetary policy interest" the head-economist of the BCR Lucian Anghel stated for NewsIn.

He considers that a possible reduction of key interest is not justified until the beginning of next year, decision which could be taken by BNR depending on how the determining factors evolve until then.

Romania's lowered rating could put pressure on BNR decision The director of investments of Interamerican Fond de pensii, Radu Craciun estimates an increase in the key interest for the following meeting of monetary policy, bt 0.5 percentage point, especially after Romania's lowering by Standard&Poor's. At the same time, he excludes the possibility to reduce the compulsory minimum reserves.

The effects of the salary increases on inflation which were the reason for the decision to drop the rating of Romana, could be counterattacked by BNT through an increase of the monetary policy interest at 10.5% per year, analysts in ING Bank Romania consider. « It will be a signal to worry, taking into consideration the latest evolutions regarding the devaluation of the national currency, but BNR will reduce, the most likely, the key interest in the first quarter of 2009" they say.

Although the S&P decision will put pressure on the national currency Ionut Dumitru does not believe that BNR will react as increasing the key interest.

« At first sight, obviously, the drop in the rating puts pressure on the exchange rate and interests, but I think that BNR will wait to see how things go. It depends on other measures which will be taken" Dumitru said.

Analysts take into consideration the reduction of compulsory minimum reserves for liabilities in lei The reduction of minimum reserves for liabilities in lei could be taken into consideration by the central bank for the next monetary policy meeting, but the S&P decision lowers the chances of such a decision, analysts say.

« At a certain moment, BNR will have to take such a decision, taking into consideration that they want to reach the position of net creditor. For the moment, the period of liquidity excess alternates with that of lack of liquidity and we are on the border. Surely, the topic is on the agenda of discussions at the monetary policy meeting, but if they are not reduced now, then BNR will decide that in the near future", Ionut Dumitru said.

Although they do not exclude the possibility of reduction of compulsory minimum reserves, Lucian Anghel says that such a decision has more chances to receive the agreement of BNR at the beginning of next year.

« I don't think there could be discussion about such a reduction for liabilities in hard currency, as long as the central bank needs hard currency. It is to be seen what is going to happen in the case of liabilities in lei, but there is the chance that this will happen at the beginning of next year" Anghel said.

BNR could revise the inflation estimate up to 6.4%Although the central bank governor Mugur Isarescu stated that BNR could revise the inflation estimate for the end of this year, from 6.6% at present on the basis of drop in the oil price, analysts do not think the estimate will be dropped at the previous level, of 6%. « I don't think the central bank will reduce the inflation estimate, as the conditions have changed. The leu went down and there are salary pressures" Ionut Dumitru said.

He added that a possible adjustment of the inflation estimate could not be justified under the level of 6.4%.Ciprian Dascalu considers that the central bank will drop the estimate to a level of at most 6.4% but " such a measure could have no influence on the conditions at present, taking into consideration there are only three months to the end of the year". On the other hand, the Millenium Bank trader considers that BNR could revise upwards the estimate regarding inflation for 2009, from 4.2% at present, to 4.5%.

BNR increased the monetary policy interest seven times since the end of October to the present moment, interval when it went up from 7% to 10.25%. The last increase was made during the monetary policy meeting of July 31, when the central bank raised the level of the key interest by 0.25 percentage points from 10%.

The inflation target set by BNR for 2008 is of 3.8% plus of minus a percentage point, and for 2009, the central bank aims at a level of inflation of 3.5% plus or minus one percentage point.

The BNR board will meet today, October 30 for the last meeting of monetary policy of this year, when the latest report on inflation will be discussed. The following monetary policy meeting of the central bank will take place on January 6 2009.

Sursa: http://www.actmedia.ro

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