The National Bank of Romania (BNR) has decided to maintain the key interest rate, maintaining minimum reserves at current levels, Governor Mugur Isarescu said on Tuesday at a news conference. The Board of the National Bank of Romania decided to keep unchanged the monetary policy rate at 1.75 percent per annum. Isarescu has also referred to the increase of ROBOR index, capital.ro informs.
“There are autonomous factors for the evolution of liquidity on the market, for example, the way in which taxes are paid, and the way in which wages and pensions are paid. The taxes are paid on the 30th of each month, the money is absorbed and goes to the BNR account, which is equivalent to liquidity absorption, and after the 5th of the month, liquidity is returned on the market by state payments, but it is a month-long move. I do not know if the Finance Ministry expected this. This month there was a better performance in collecting the taxes. It was collected more than expected. I do not know is they expected this but the banks absorbed more liquidity. BNR’s role is to regulate liquidity. Our operations are weekly. The moment of September 2017 comes after a long period of liquidity surplus,” Isarescu said.
According to him, “the exchange rate struggled at RON 4.59 for EUR 1 for some time. It would be ridiculous not to admit this pressure. It refers to the non-residents’ behaviour. About RON 20 billion is fluctuating.”
“Another factor that caused the lack of liquidity is inflation, as well as the non-residents’ behaviour. Anyone can trade government bonds, the amounts they invested in Romania are diminishing. Unlike the previous months, this time it took a little longer,” the BNRGovernor said.
“The foreign exchange reserves are appropriate now. The ROBOR is calculated in the morning. The BNR liquidity injection, the repo operations were completed later, you will see the effects of this operation tomorrow. The Finance Minister met with the executive management of the bank. Technical issues were discussed. The absorption of liquidity was mainly done by the Treasury,” Mugur Isarescu said.
He believes that “an interest rate increase in the range of 1%, that will be the normality” and says that “an interest rate movement around the monetary policy rate plus/minus 1% for me is more or less normal.”
The Romanian Interbank Offered Rate (ROBOR) index at three months, used for variable-rate loans, has continued to hike on Tuesday to reach 1.8%, while 6-months ROBOR index has climbed to 1.89%, according to data released by the BNR on Tuesday.
Finance Minister Ionut Misa has said on Tuesday, after a meeting with the BNR representatives, that the ROBOR increase is related to issues of market liquidity, given that the tax collection rate has increased and it’s the BNR job to find solutions in order to ponder the ROBOR raise.