Romania's possible July 1 interest rate cut awaited with mixed expectations

By bne IntelliNews June 28, 2013

Bank analysts in Romania await with mixed expectations the central bank’s monetary board meeting on July 1, when it might decide to lower the current 5.25% interest rate, a survey of Bursa daily revealed.

While some expect a 25bps interest rate cut, others believe that the central bank will maintain its cautious approach for at least one more month. The most radical projections are for the monetary interest rate to fall to 4% somewhere in the first part of 2014.

Under a more moderate scenario considered by bank analysts, the first interest rate cut would be operated in September and will be followed by a reduction of the required reserve ratio for local currency liabilities in mid-2014.

As we reported, central bank governor Mugur Isarescu announced an imminent interest rate lowering two months earlier at the latest monetary board meeting. But meanwhile the foreign investors’ risk aversion increased and the foreign currency outflows resulted in weaker domestic currency and more volatile exchange rate. The yields on the government debt issues on the primary market, as well as the quotations on the secondary market, also increased.

 

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