Romanian central bank’s rhetoric fails to lift interest rates

23 May 2019

There is no evidence of strict liquidity control yet, ING Romania concluded in a piece of research issued on May 22, nearly one week after the central bank announced at the monetary board meeting that it would “tighten control over money market liquidity” as an alternative to hiking the interest rate.

Indeed, the cost of overnight funds dwindled 0.1 percentage points to 1.6% on May 22, the lowest level in one year.

The whole yield curve shifted downward actually. This indicates the market does not perceive the central bank’s commitment to strict liquidity control as being supported by short-term action.

ING Romania promised to “look for any material debate on how to innovate the policy toolkit for better control of the liquidity backdrop”, in the central bank’s minutes scheduled for release later the same day.

BNR governor Mugur Isarescu hinted at more creative instruments such as certificates of deposit to be used in addition to the standard one-week repo-type deals for draining liquidity from the money market and urged banks to raise deposit rates to the 2.5% monetary policy rate.

editor@romania-insider.com

(Photo source: Pixabay.com)

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Romanian central bank’s rhetoric fails to lift interest rates

23 May 2019

There is no evidence of strict liquidity control yet, ING Romania concluded in a piece of research issued on May 22, nearly one week after the central bank announced at the monetary board meeting that it would “tighten control over money market liquidity” as an alternative to hiking the interest rate.

Indeed, the cost of overnight funds dwindled 0.1 percentage points to 1.6% on May 22, the lowest level in one year.

The whole yield curve shifted downward actually. This indicates the market does not perceive the central bank’s commitment to strict liquidity control as being supported by short-term action.

ING Romania promised to “look for any material debate on how to innovate the policy toolkit for better control of the liquidity backdrop”, in the central bank’s minutes scheduled for release later the same day.

BNR governor Mugur Isarescu hinted at more creative instruments such as certificates of deposit to be used in addition to the standard one-week repo-type deals for draining liquidity from the money market and urged banks to raise deposit rates to the 2.5% monetary policy rate.

editor@romania-insider.com

(Photo source: Pixabay.com)

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