ING and UniCredit see the euro at 4.50 RON at yearend

The NBR (National Bank of Romania) could reduce the monetary policy interest rate by half a percentage point on June 30, to 9% a year, without it having a negative influence on the RON/EUR exchange rate, as long as it is already considered by the market, ING Bank and UniCredit analysts estimate. At the same time, the two banks anticipate a worsening in the RON’s position against the euro in the second half of the year, with the end-of-the-year forecast pointing to a level of 4.50 RON/EUR. This would mean an over 7% depreciation of the RON compared with the current level. One of the arguments, which could prompt the NBR to reduce the interest rate on June 30 is the continuous disinflation recorded over the last few months. In addition, analysts also notice that lending has largely remained frozen, with a stronger stimulus being needed from the central bank. “Given the continuous disinflation recorded in the context where lending is still frozen, the NBR could decide on a more significant, 0.5% reduction of the interest rate,” UniCredit says. For the second half of the year, analysts of the Italian group expect fewer major cuts in the RON key interest rate, given that it will be more difficult for the NBR to hit its inflation target. This would mean a 9% interest rate at the end of the third quarter, and an 8.5% rate in December. ING expects a reduction by half a percentage point on June 30, to 9%, which could possibly be followed by another reduction in August.