The pro-Brexit vote of the British was rather an emotional shock, almost imperceptible on the monetary market in Romania, but its impact will be felt in the longer run, given that it has enhanced uncertainty and weakened the European spirit, National Bank of Romania (BNR) Governor Mugur Isarescu told a conference unveiling the monetary policy decisions adopted on Thursday.
“It was a rather emotional shock and in the monetary market it was imperceptible. I believe it was exaggerated when it was said that the ROBOR [Romanian interbank offer rate] moved. The movement wasn’t determined by the BNR intervention. We don’t comment on the interventions of the National Bank, but to show the emotional manner in which information was passed, I am telling you that we didn’t even think of intervening in the exchange market, and the exchange rate corrected on its own. The impact was almost insignificant. Movements were very low, almost insignificant and the comments were very big and sometimes risky. We create problems without needing them,” Isarescu said.
He mostly referred to comments that the 3-month ROBOR indicator, taken as a reference for updating the interest rates for most loans denominated in RON increased after the voting in the UK, to 0.85 percent, from 0.76 percent, in the previous session. “At a 50-euro monthly payment [lei-equivalent], the additional cost is 5-6 lei,” Isarescu explained.
However, the BNR governor warned that BNR’s evaluation of the Brexit impact on the Romanian economy, also presented in the report on financial stability, remains valid. “We keep our appreciations. The Brexit was a major risk, it materialised, the impact, however, is in a longer run and derives from two things: uncertainty (because it enhanced uncertainty) and the fact that it weakens the European spirit. And to Romania, the European spirit was the main anchor,” said Isarescu.
Consequently, he added, drawing up a new strategy is out of the question, but the strategy will be adapted to the ongoing circumstances, taking into account that no one knows for sure what the future developments will be. “We shall adjust both policies and strategies for the circumstances that will develop. Our current policies in the coming period will have a much more applicative nature,” the BNR governor also said.
Central bank decides to maintain key interest rate at 1.75pc per year
The Board of the National Bank of Romania (BNR, the central bank) decided on Thursday to maintain the key interest rate at 1.75 per cent per annum and to keep unchanged the current levels of the minimum reserve requirement ratios on both leu and foreign currency liabilities of the credit institutions, a BNR release informed.
At the same time, the BNR board decided to manage properly the banking system’s liquidity.
The BNR ‘is closely monitoring external and domestic developments and stands ready to use all its available tools during this period of heightened uncertainty in a bid to fulfil the overriding objective regarding medium-term price stability and to preserve financial stability,’ the release reads.
BNR’s key interest rate is unchanged since May 2015.
Isarescu: We expect inflation’s negative territory to diminish, but to smaller extent than forecast
The annual inflation rate in Romania remains in negative territory for longer than previously projected by the National Bank of Romania (BNR), but with a diminished negative territory as the effects of the Value-Added Tax cuts for foods in June 2015 having worn out because of uncertainties and falling import prices, BNR Governor Mugur Isarescu said Thursday.
‘We are expecting the inflation’s negative territory to diminish in the months to come, but to a smaller extent than previously forecast. Such a trajectory will influence the monetary policy decisions of the National Bank. Uncertainty is predominant in Europe and the world overall, increased by the UK’s vote [to leave the European Union]. The novelty here is our approach becoming more practical. We are paying attention to how things develop and act accordingly with all we have at hand,’ Isarescu explained.