Bank analysts expect another interest rate cut in Romania on August 5

By bne IntelliNews August 2, 2013

Romania’s central bank is anticipated cut the monetary policy interest rate by another 25bps to 4.75%, according to an opinion poll of the bank analysts’ association quoted by news agency Agerpres.

The central bank cut the policy interest rate by 25bps to 5% on July 1 after having maintained it at 5.25% for more than a year. Out of the 19 analysts polled, 14 believe that the central bank would pursue a second interest rate cut this month.

The central bank would further cut the policy interest rate to 4.5% by the year-end but would slow down pace of the interest rate reduction so that the rate would touch 4.25% at the end of 2014, according to the poll's baseline scenario. Analysts’ expectations for the monetary policy rate at the end of 2014 range between 3.5% and 4.5%.

In regards to the required reserve ratios, analysts believe that the ratio for domestic liabilities could be reduced from 15% currently to 12% -- but rather next year than this year, while the ratio for forex liabilities would remain at 20% at least by the end of 2014.

Romania’s central bank targets an end-year headline inflation of 2.5% +/-1pps and the inflation targeting band will remain at this level for the coming years. Under the most recent projection, actual inflation [5.37% at the end of June] would enter the inflation targeting band before the end of 2013.


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