Romanian central bank announces key rate cut

The National Bank of Romania (BNR) on Wednesday announced to lower the monetary policy rate to 3.75 percent per annum from 4.0 percent, starting from Jan. 9. This is the first cut in this year, after the four cuts in 2013, with the last one on Nov. 6. According to a release of the central bank, the bank also decided to cut the minimum mandatory reserve rate applicable to the national leu currency liabilities of the crediting institutions to 12 percent from 15 percent, and to slash the minimum mandatory reserve rate applicable to the forex liabilities to 18 percent from 20 percent, to be enforced from Jan. 24-Feb. 23, 2014. "The BNR Board reiterates that the sensible use of all the instruments the central bank has available, while carefully monitoring the domestic developments and the developments of the global economic climate is likely to secure the stability of the prices on the medium-term and financial stability," the BNR release explains. According to central bank governor Mugur Isarescu, the banks will be left with roughly 500 million euros (679 million U.S. dollars) and 4 billion lei (1.2 billion dollars), by slashing the minimum mandatory reserve rate. BNR's decisions were welcomed by local banking sector and considered by local economists to help relaunching the crediting, but they also said that the move does not completely solve the issue, which is far more complex. "The issue of credit restart is not exactly in the costs, but in the demand. We have competitive interest rates, however the crediting does not grow," Ionut Dumitru, chief economist of Raiffeisen Bank and Chairman of the Fiscal Council, was quoted by national Agerpres news agency. According to him, the households are heavily indebted at present, while many of the companies are in the red, therefore they do not qualify for credit. The central bank lowered the benchmark rate 17 times from 10.25 percent in January 2009 to 4.00 percent in November 2013.