Wednesday, January 27, 2010

Romanian Main Interest Rate to Stay Above 6% in 2010, ING Says

By Adam Brown

Jan. 26 (Bloomberg) -- Romania’s central bank will keep the benchmark interest rate above 6 percent in 2010 as it misses its inflation target for a fourth year, ING Bank Romania forecast.

“Inflation will remain elevated in 2010,” Nicolaie Alexandru-Chidesciuc, chief economist at ING Romania, wrote in an e-mailed note today. “It is unlikely the key interest rate will fall below 6 percent during 2010 and we may see hikes already in the first quarter of 2011.”

Tobacco tax increases and continued lending increases pushed up the inflation rate to 4.7 percent last year, compared with a maximum 4.5 percent target. Alexandru-Chidesciuc predicts end-year inflation of 5 percent in 2010, compared with the goal of a maximum 3.5 percent. Since starting inflation targeting in 2006, the central bank has met its target once.

Inflation pressures will prevent the bank from large rate cuts this year even as it seeks to stimulate growth, Alexandru- Chidesciuc said. The government estimates the economy will grow 1.3 percent in 2010 after contracting about 7 percent last year.

The Banca Nationala a Romaniei has lowered its Monetary Policy Rate to 7.5 percent from 10.25 percent at the beginning of last year, the latest cut coming on Jan. 5. It next meets to debate rate changes on Feb. 4.

To contact the reporter on this story: Adam Brown in Bucharest atabrown23@bloomberg.net

1 comment:

Parag said...

In 2009 the Romanian economy was heavily affected by the global financial downturn and contracted by some 4.0%.The IMF, the European Council, as well as some independent analysts predict that growth will resume in 2010.Future prospects are tied to the country's increasingly important integration with the European Union member states. The country is expected to join the Eurozone in 2014.
rate of inflation