Analysts expect cuts on minimum compulsory reserves

The market is again divided before today’s NBR (National Bank of Romania) meeting on monetary issue problems, with many analysts expecting to see a cut in the minimum compulsory reserves, whilst also not ruling out the possibility of a new drop in interest. Analysts from different banks are considering various potential situations, including maintaining the current terms. The second monetary policy meeting of the NBR’s Board of Directors in 2007 is held today, less than two months since the previous meeting. In the meantime, the RON has continued to appreciate, despite the drop in the interest rate, from 8.75% to 8%, on February 9. Inflation continued to decrease, despite fears of a potential negative impact from the increase in budget expenses in December, while actual interests on the market increased following a drop in liquidities. The Minister of Finance, Sebastian Vladescu, explained that these expenses were mainly money transfers “on paper”, such as the issuing of titles of property, or the capital increase at the CEC (The Romanian Savings Bank), and not actual expenses that would have brought liquidities onto the market. None of the analysts interviewed by ZF believe that the NBR might couple the cut in the monetary policy interest with the lowering of minimum compulsory reserves. A month ago, the NBR surprised the market by a shock lowering of the monetary policy, without however modifying the level of reserves. In fact, the NBR did not operate any modification for the minimum reserves over the last three quarters, after initially increasing the rates for reserves in RON in June last year.