Romania’s Ctrl Bk Set To Ease Monetary Policy Next Wk – Analysts

BNR’s Board will have a monetary policy meeting on Wednesday, February 4. In its last meeting, early January, the central bank board decided to keep the key monetary policy interest rate at 10.25%. It also kept the minimum required reserves ratio on both leu-denominated and foreign currencies liabilities of credit institutions at 18%, and 40%, respectively.

 

All six analysts that were polled by MEDIAFAX predicted a monetary policy easing following the Wednesday’s meeting, while four of them forecasted at least a cut in the key rate.

 

BRD’s chief economist Florian Libocor said that the central bank should cut the rate by 50 basis points, to 9.75%, and the minimum required reserves ratio on leu-denominated liabilities by one percentage point, to 17%.

 

Libocor added that the monetary policy will follow a lessening trend in 2009. He sees the key rate at 7.5% at the end of 2009. The ratio for leu liabilities should be at 15%, while foreign liabilities minimum reserves ratio should be at 35% end-2009, according to Libocor.

 

Millenium Bank dealer Ciprian Dascalu also said the central bank would cut the rate by 0.5 percentage points, but he is betting on a two percentage points reduction of the minimum required reserves ratio for leu-denominated liabilities.

 

Lucian Anghel, BCR’s chief economist, said the central bank might cut the rate by 0.25 percentage points. However, a decrease of the reserve ratios would have a broader impact on the market, he said.

 

If BNR cuts both the rate and the reserve ratios, than it would show its “concern,” Anghel added.

 

ING Bank Romania’s senior economist Nicolaie Chidesciuc also bets on a 25 basis points cut. He added a cut in reserve ratio is also possible, as the central bank would put aside the leu’s depreciation to boost the economy.

 

However, Raiffeisen Bank Romania’s chief economist Ionut Dumitru and Radu Craciun, investment director at Interamerican Fond de Pensii, said that the central bank will only reduce the reserve ratio, and not the interest rate.

 

They both said a cut in the reserves ratios would lead to higher liquidity in the financial market.