NBR’s economy boosting: interest cuts in small steps

The National Bank needed more than one year to cut the key rate on RON by 3.75% to an all-time low of 6.5% per annum, even though the economy slipped into recession in the summer of 2008.
NBR yesterday took one more step towards making loans cheaper, by cutting the key rate by half a percentage point, to 6.5% a year, but warns again that bankers are behind with adjusting interests charged from their clients.
The decision was expected by most analysts and players, given that inflation fell back to levels accepted by the NBR in February and the RON is following an upward trend, so that the impact on the forex and monetary markets was insignificant.
Bankers are pleased with NBR’s move but remain sceptical and say more needs to be done if lending is to be resumed, especially in terms of risk perception.
“We, too, are interested in having the economy move and the consumer and mortgage lending pick up because they are stagnating now. What NBR has done is consistent with a normal policy,” says Sorin Popa, deputy CEO of BRD-SocGen, the second largest bank on the Romanian market.
Even after this step, NBR remains the central bank with the highest interest rate of all central banks in the EU, although the economy is unable to resume growth.