Cercel, BRD: There is no reason to raise interest rates if the state cuts deficits

As long as the Government pursues fiscal consolidation by cutting spending as well as evasion, and by extending the scope of taxation, there is no reason for the monetary policy to begin a cycle of strengthening, and the NBR (National Bank of Romania) could even bring the interest rate down by 0.25-0.5 percentage points by the end of the year, after the price increases generated by the VAT raise are assimilated, says Claudiu Cercel, vicepresident in charge of financial markets at BRD-SocGen.
The NBR has kept the key interest rate at 6.25% after the announcement of the VAT raise to 24%, with the next monetary policy meeting scheduled for August 4th.
“The effects of raising VAT – which are not all bad considering that it is in fact consumption that prompted many of the current imbalances- will pass fairly quickly, so the interest rate will probably stay at 6.25% in August, and could further slip until the end of the year, by 25-50 basis points. But this also depends on international developments, which will continue to affect us greatly.”