Depreciation vs. appreciation of the RON in second half of the year

The NBR (National Bank of Romania) could lower the monetary policy rate to 7%, at the end of this year, anticipate Raiffeisen analysts in Vienna. They also consider it likely that the lowering of the interest rate will soften the pressure over the appreciation of the RON. As a matter of fact, analysts believe the recent decision of the National Bank to cut down monetary policy rate by three quarters of a percentage point, to 8% was mainly prompted by the quick appreciation of the RON – started in December last year, as well as by the improvement of the inflation prospects. Raiffeisen Vienna analysts note the inflation rate for January was much lower than market expectations (of 0.2%) leading to the lowest annual inflation since 1990 (4%). The bank’s analysts expected the NBR to reduce the interest to 8.25%, but say the decision of the central bank is considered surprising for the market. In the short run, Raiffeisen Vienna sees the RON strengthening to an exchange rate of 3.35 RONEUR in March. For the second half of the year, a reverse direction is projected, with the national currency to see a slight depreciation. In this situation, the RON would be valued at 3.40 to one euro in the July-September period, and further to 3.45 RON per euro in December.