Isarescu: “Banks crossed the line, took the ROBOR over the key interest rate. They overreacted”

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During the conference to present the quarterly report on inflation, the Governor of the National Bank of Romania (BNR) said that “the banks crossed the line and took the ROBOR above the key interest rate”. Moreover, Mugur Isărescu also declared that the time of low interest rates has passed.

According to the central bank’s governor, the BNR sees a moderation in consumption and believes that in the 2nd semester it will be felt even more. “Consumers are more oriented towards discount stores and products from the own brand range,” Isărescu said, who also stated that Romania has major problems in terms of budget spending and that the era of low interest rates is over.

The BNR chief said that the banks “crossed the line” with the ROBOR rise, which has also led to increasing the deposit interest rates. “They have overreacted (the banks). The banks’ and traders’ tendency was clearly to look pessimistically at the future. They should be more careful to the BNR’s messages”, Isarescu said.

Romania contracted loans at higher interest rates compared to other countries, including Hungary, because it had the biggest deficits, said Governor Mugur Isărescu, when asked by a journalist “why Romania borrows at high interest rates even higher than Hungary , which is in a bad situation”.

“Romania borrowed at higher interest rates compared to other countries, including Hungary, because it had the biggest deficits”, said Mugur Isărescu.

According to the governor, Romania’s international reserves have not decreased, but they have not increased either. If the capping scheme did not intervene, we would have had 20% inflation, the BNR governor also said.

“Inflation is a global phenomenon, it is not only present in Romania. The lowest inflation in Europe exceeds 5%. Romania is on the 7th place in terms of inflation. In Romania, inflation was due to energy, utilities, but also food. If the capping scheme had not intervened, we would have had 20% inflation. In Hungary, inflation is lower because the capping scheme was also more generous”, said Mugur Isărescu, adding that the inflation rate will cap this quarter. “It is possible that in August we will see some increases, but gradually, the tendency is to decrease“, said Isărescu.

According to a BNR press release released last week after the meeting of the Board of Directors on monetary policy issues, the updated forecast of the central bank highlights the prospect of capping the annual rate of inflation in the third quarter of the current year and its subsequent decrease gradually, but on a trajectory moderately revised upwards.

In its meeting of 5 August 2022, the Board of the National Bank of Romania decided to increase the monetary policy rate to 5.50 percent per annum, from 4.75 percent per annum, as of 8 August 2022 and also to raise the lending (Lombard) facility rate to 6.50 percent per annum from 5.75 percent per annum and the deposit facility rate to 4.50 percent per annum from 3.75 percent per annum, as of 8 August 2022.

BNR also agreed to maintain firm control over money market liquidity and to keep the existing levels of minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions. Read more here.

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