Citi: NBR's interest rate should climb to 10%

The cut in the key interest rate by the NBR (National Bank of Romania) to 7% last summer was premature. Now, an increase of as much as 10% is necessary, given the deterioration of the inflationary outlook, according to an extensive report on Romania, drawn up by analysts of American bank Citi, a year into EU membership, entitled “Romania, en route to a soft landing, amid challenges.” “The possible reluctance of the NBR towards continuing to increase the interest rate, amid concerns over the RON’s appreciation, would pose a major threat to the credibility of the monetary policy. The current level of the real interest rate is low,” writes analyst Ilker Domac. At present, the interest rate stands at 9%, while the next modification could be take place on March 26. The report has been drawn up as a result of recent meetings with the Finance Ministry, NBR and international financial institutions officials, as well as with independent players and analysts, with the overall tone being optimistic. According to the report, “a soft landing” is more likely to happen than a disorderly adjustment to the imbalances caused by the difficulties faced by international financing.