Bloomberg News

Romania to Leave Rates Unchanged on Threats to Growth, Leu

September 29, 2011

(Updates with currency prices in fifth paragraph.)

Sept. 29 (Bloomberg) -- Romania’s central bank will probably leave interest rates unchanged for an 11th meeting today as the euro-area debt crisis clouds the economic outlook and weakens the currency.

The Banca Nationala a Romaniei will leave its monetary policy rate at 6.25 percent, according to all 13 economists in a Bloomberg survey. The bank will announce its decision after 11 a.m. in Bucharest.

Romanian policy makers have kept borrowing costs steady since last June as they assess the fading effect of a tax increase on prices. Central banks across the region are seeking to balance the risks of slower growth in western Europe, the main importer of goods from its eastern neighbors, and weaker currencies as investors cut exposure to emerging-market assets.

“We think the central bank will keep its cautious approach because of the uncertain situation on financial markets,” said Gaelle Blanchard, a London-based emerging-market analyst at Societe Generale SA, who expects a rate cut early next year. It “doesn’t want to see the leu weaken too much due to the risk to inflation and financial stability, so cutting rates now would be quite risky for the currency.”

The leu, the fifth-best performer this year among 25 emerging-market currencies tracked by Bloomberg, rose 0.1 percent to 4.3224 against the euro as of 9:20 a.m. in Bucharest trading, after closing at a 2011 high of 4.3276 yesterday.

Inflation Slows

Poland’s central bank left borrowing costs unchanged in September on expectations inflation will slow and the economy will weaken. Hungary kept its benchmark interest rate steady for an eighth month Sept. 20, while the Czech central bank followed suit two days later.

Romanian policy makers left rates on hold after an increase in the value-added tax rate to meet international bailout pledges boosted inflation to the fastest in two years. Before that, the bank lowered borrowing costs four times to combat the worst recession in two decades.

Romania’s inflation rate fell to the lowest in 17 months in August, dropping more than economists forecast as a bumper harvest boosted food stocks. It declined to 4.25 percent from 4.85 percent in July, the lowest since March 2010, the National Statistics Institute said on Sept. 12.

Inflation should fall within policy makers’ target range of 2 percent to 4 percent in 2012, with price growth to slow to 3.3 percent in the first quarter before accelerating to 3.5 percent by the end of the year, according to a central bank forecast.

Economic growth slowed to 1.4 percent from a year earlier in the second quarter compared with 1.7 percent in the first. Romania is on track to meet a forecast of 1.5 percent growth for this year, Prime Minister Emil Boc said on Aug. 17.

--With assistance from Barbara Sladkowska in Warsaw. Editors: Douglas Lytle, Alan Crosby

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


Silicon Valley State of Mind
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus