Analysts expect Romania's central bank to keep monetary policy status quo, drain liquidity

Chief economists of the large Romanian commercial banks Raiffeisen Bank, ING Bank, Unicredit and Banca Transilvania agree that, under the current circumstances including local elections and volatile international environment, Romania’s National Bank (BNR) will keep its monetary policy interest unchanged for the current year, namely for the entire mandate of BNR’s current Board of Directors, Economica.net reported.

However, households should expect higher costs for their consumer and mortgage loans, since BNR will likely consider other means to defend exchange rate stability. Specifically, the analysts expect BNR to revise the inflation forecast upward and exert stricter liquidity controls on the interbank money market to protect the local currency against depreciation. Nonetheless, this will result in higher interest rates on the money market and higher levels of the newly-introduced benchmark used for calculating the interest rates for retail loans (IRCC).

Since the trading on the money market takes place mainly in the region of short-term maturities and BNR will control liquidity by intervening in this region, it is likely that IRCC will rise proportionally. In contrast, the former ROBOR benchmark is measured for longer-term maturities and would have increased at a smaller extent as a result of BNR’s interventions, the quoted analysts explained.

(Photo source: Shutterstock)