Romanian Ctrl Bk Rate Cut Impact Deemed Modest

Publish date: 04-02-2009
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Romanian central bank's decision to cut the key rate will not have a significant impact upon inter-bank interest rates that will have been slashed more aggresive if the central bank would have reduced the minimum required reserves ratios for leu liabilities, economic analysts said Wednesday.

Radu Craciun, the investment director of Interamerican Fond de Pensii, said the central bank should have cut the minimum required reserves ratios as they would have injected more liquidity into the market.
Romanian central bank cut Wednesday the key rate by 0.25 percentage points to 10%, but kept the minimum required reserves ratios unchanged.
ING Bank senior economist Nicolaie Chidesciuc sees the key rate reduction just a proof that the central bank "cares about economic growth."
The impact of the rate cut upon inter-bank interest rates is quite low as they were on Wednesday much higher than the key rate, Chidesiuc said.
On the money market on Wednesday, overnight rates were at 13.98% - 15.23% a year and weekly rates at 14.11% - 15.62% a year.
Raiffeisen Bank's chief economist Ionut Dumitru also said the rate cut is only a signal, as the economic analysts expected a lower rate after Wednesday's meeting.
According to Dumitru, central bank's decision was also influenced by the depreciation of the leu and of the regional currencies against the euro.
The rate cut on Wednesday had no effect upon the leu's level as it recorded slight variations after the announcement at around RON4.31 to the euro and closed at RON4.3050/RON4.31 against the euro, almost similar with its level at the end of Tuesday's trading session.


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