Citi Group deems the central bank should hike key interest more than 9% to calm down the leu

Romania's yearly key interest rate set by the central bank to 8 percent should be increased to 9 percent to control pressures depreciating the national currency, according to analysts within the Citi Group.

They are expecting hike of 0.5 percentage points next month.

In the event the exchange rate will continue the downward trend next month and fall under the 3.7 threshold against the euro, the central bank could intervene on the market and temper it, analysts said in a report released today.

Experts pointed that central bank officials have been trying to fight the leu's fall through recent comments as well. Vice governor Cristian Popa said yesterday that the leu's drop cannot be sustained, asking for tougher monetary conditions.

Chief economist Valentin Lazea noted the lender can also use other instruments on the market besides the key interest rate.

The leu began the year with a massive dive, hitting a three-year low last week of  3.716 against the euro on a widening public deficit.

The Money Channel