Although the maintaining of the 10.25 percent rate was expected, most economists are predicting that the rate will be raised in BNR’s October session. “We believe this will have no effect on the leu, because the decision was expected,” said Vlad Muscalu, ING Bank Romania analyst. He added that a rise in October will likely be followed by reductions at the beginning of 2009, and that the October increase could be intended to control inflation next year.
Muscalu is also expecting social expenditures prior to general elections to drive the budget deficit to 3.8 percent by the end of 2007. “Besides being an election year, experience in the past few years shows that there are huge public expenditures at the end of the year,” added ING Bank’s analyst.
