NBR adjusted again the stance of the monetary policy

At today’s monetary policy meeting, the National Bank of Romania (NBR) adjusted again the stance of the monetary policy, said Raiffeisen Research in a press release. rnrnThe NBR cut the monetary policy rate by 50 bp to 8.5% and reduced to one week from one month the maturity of the main monetary policy instrument, the repo operations via auctions. rnrnNBR decided also to cut the minimum reserve requirements for banks’ liabilities in foreign currencies from 35% to 30%. The decision would boost FCY liquidity in the banking system by around EUR 1.3 bn starting 24 August. We recall that FCY liquidity was boosted by another EUR 1.3 bn on 24 July after reserve requirements were reduced from 40% to 35%. At that moment, the banks lent the largest part of the liquidity excess in FCY to the government in a “club loan”. rnrnClearly, the main reasons for central bank’s decisions were the rapid deceleration of economic activity and the clear downward trend of the inflation rate. We expect the NBR to cut further the monetary policy rate to 8% by the end of the year. A more aggressive approach is not excluded, especially if there would be no pressures for leu depreciation. rnrnFollowing today’s decision, we expect to see lower interest rates in money market. Also, lending and deposit interest rates in the economy should decrease further and yields for government bonds should also move to a lower level in the next period. rn