NBR leaves interest rate unchanged, but sparks debate among analysts

The National Bank kept the key interest rate on RON-denominated loans at 6.25% a year for the fourth time in a row, but the decision sparked a rift among analysts, with some saying the monetary policy should be eased, in order to support the economy, while others see the danger of inflation returning, which needs to be fought against.

All commercial bank analysts anticipated yesterday that the interest rate would be kept unchanged, with more than three quarters of them believing this will be replicated in the next session of the NBR (National Bank of Romania), scheduled for November 2nd. Around a fifth, however, are expecting the NBR to make RON loans more expensive towards the end of the year, amid an inflation outbreak, according to an internal survey conducted by the Association of Financial-Banking Analysts in Romania. For bankers, the persistence of higher interest rates means the possibility of higher revenues.

Conversely, analysts closer to the commercial segment and businesspeople are asking more and more persistently for cheaper RON loans and for a more flexible exchange rate, measures that would stimulate the economy, which has been in recession for over a year.

“In a world in which Romania rose by 3% I would say inflation (which climbed to 7.6% in August, after the VAT hike in July from 19% to 24% i.e.) was a problem, but we are not in such a position. The NBR has got its priorities wrong,” says investment banker Matei Paun.

In the first half of 2010 the Gross Domestic Product was 1.5% lower in real terms than in the similar period of last year.