The National Bank of Romania maintains the benchmark interest rate.

After 11 consecutive increases in the monetary policy interest rate, between October 2021 and January this year, the National Bank of Romania – BNR maintained the key interest rate at 7% per year, as established in last month's meeting. The BNR also kept the current levels of the minimum reserve rates against liabilities in lei and in foreign currency of credit institutions, i.e. those amounts that the commercial banks are obliged to hold in the accounts of the Central Bank. An explanation for the central bank’s decision would be that it expects the annual inflation rate to decrease faster than anticipated. The BNR experts now estimate that inflation will fall below 10% as early as the third quarter of this year and that it will register at the end of 2023 a value far below that previously anticipated one. The new statistical data reconfirm, on the other hand, the significantly higher than expected increase in economic activity in the third quarter of 2022.

Under these conditions, the BNR's decision was predictable, says financial analyst Adrian Codirlaşu: "It is somehow in line with what is happening in the region. Poland has 6.75%, the Czech Republic has 7%, so similar inflations to Romania. Moreover, positive news came from the perspective of reducing inflation in the developed countries. I am referring to the United States, where inflation is decreasing quite quickly, to the European Union, where inflation has also decreased beyond expectations. And what is equally very important is that the price of methane gas has decreased. Now it stands somewhere at around 55 Euros per megawatt-hour. It was 340 Euros per megawatt-hour in August. This led to a substantial decrease in the price of electricity. Also, the price of cereals decreased. And this contributes substantially not only to the reduction of the inflation rate, but also to the recovery of industrial activity, thus to higher economic growth. Therefore, this lower inflation, which means less aggressive central banks in raising interest rates, combined with lower prices also leads to lower inflation rate and to improved economic growth projections".

Given that most specialists anticipated the BNR measure, its effects on the interest rates charged by banks will be limited, believes Adrian Codirlaşu. According to him, the information was already included in the market interest rates, and the rates were already on a downward trend, one that will be maintained. What matters in this trend, apart from the anticipated decreases in the interest rate, is the liquidity in the market, says the analyst. And market liquidity increased substantially in the last quarter. The Romanians who have credits in lei with costs calculated according to the ROBOR index already notice a capping or even a slight reduction of this indicator. However, the war in Ukraine will continue to generate uncertainties and risks regarding the perspective of economic activity and, implicitly, the medium-term evolution of inflation, BNR experts warn. (LS)