Lower cash reserve ratio could release pressures on the leu

Analysts were expecting the key rate to remain idle. However, the lowering of the cash reserve ratio took them by surprise. Experts interviewed by Business Standard say the measure will lead to lower pressures on the local currency, as more lei will be available on the market.

Some analysts were not happy with the BNR decisions. “Both maintaining the key rate and lowering the CRR by only two percentage points are major mistakes,” according to BAC Investment Romania Managing Partner, Matei Paun. “BNR has a conservative position. It has always been one step behind the events. While all major central banks lowered their key rate, we maintained ours. And the cash reserve ratio should have been reduced further, to 15 percent or more,” Paun added.

However, BCR Chief Economist, Lucian Anghel, said a two percentage point reduction is significant. “The decline is not as small as some believe, but it must be done gradually. I expect the CRR will keep dropping for lei and not for foreign currencies,” Anghel said. He added that the key rate is likely to be reduced early next year.