Interest Rates may rise later this year, says Franks, IMF

Newsroom 02/08/2011 | 09:09

Jeffrey Franks, head of IMF mission for Romania, appreciates that the central bank may have to raise interest rates to counter possible energy-prices, in an interview for Bloomberg. The National Bank of Romania current benchmark interest rate stands at 6.25, unchanged for the last 15 months.

Franks also has a positive outlook for the inflation rate, which dropped to 7.9 percent in June: “We know the inflation rate is going to drop in July and here food prices from the agricultural harvest should be helpful.” The central bank targets an inflation rate of 3 percent, minus/plus one percent, while the IMF forecasts a 5.5 percent rate for 2011. Franks says that investor interest for Romania is likely to rise after Fitch rating raised the sovereign-debt to investment grade, last month.

The government should be cautious in its plan to sell stakes in utility companies Transelectrica and Transgaz, as markets will be unstable due to a worsening of the euro-area debt crisis. A majority stake in chemical company Oltchim will be sold later this year, and the sale of a majority stake in CEC, Romania’s last-remaining state bank, would also be “an attractive target”.

Ovidiu Posirca

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