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Erste sees Romania's c-bank easing monetary policy further

Erste sees Romania's c-bank easing monetary policy further National Bank of Romania. Author: Doinita Dolapchieva. Licence: All Rights Reserved.

BUCHAREST (Romania), January 20 (SeeNews) - Erste Group Research said on Tuesday it expects Romania's central bank to cut its key monetary rate further, to 2.25% from 2.50%, amid low inflation and modest economic growth.

"Against a low-inflationary background, we see the central bank relaxing monetary policy further through at least one cut in the key rate (2.25%) and possibly additional reductions in mandatory reserves both on RON [leu] and FC [foreign currency] liabilities," Erste Group Research said in its 1Q15 CEE Bond market report.

On January 7, Romania's central bank decided to cut its monetary policy rate to a record low of 2.50% per year from 2.75%, in line with expectations. It kept unchanged the minimum reserve requirements ratios on liabilities of credit institutions, at 10% for leu-denominated liabilities and at 14% for the ones denominated in foreign currency.

"We expect the local economy to grow at a modest pace of 2.2% this year, amid efforts to further consolidate public finances," Erste Group Research said.

The bank's analysts expect Romania to remain politically stable, although a cabinet changeover should not be ruled out following a possible reconfiguration of the balance of forces in the country's parliament.

"If the ECB [European Central Bank] embarks on a full-scale QE [quantitative easing] or at least increases liquidity injections and the Federal Reserve pushes back the key rate hike to late 2015, a buying mood for Romanian bonds could prevail in the period going forward," the report added.

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