Romania’s 3-month ROBOR soars to 4y4m high

Sorin Melenciuc 02/07/2018 | 11:24

Romania’s three month money market rate (ROBOR), the main indicator that sets the interest rates for RON currency borrowers, reached on Monday a record high of the last four years and four months of 3.24 percent, as never-ending political tensions, higher inflation, higher interest rates and shaky fiscal position create a grim picture for the Romanian economy.

The ROBOR 3M calculated for July 2, 2018, is the highest since March 5, 2014, National Bank of Romania (BNR) data show. The 3-month rate rose by 0.09 percentage point from the previous market session.

Compared with the end of 2017, the 3-month index rose by 1.19 percentage point (+58 percent), from 2.05 percent.

The 3-month ROBOR index reached a record low of 0.68 percent in September 2016.

The 6-month ROBOR index increased from 3.24 percent to 3.29 percent on Monday, the highest level since May 13, 2014.

Grim economic picture

Economists point out that Romania’s general economic picture looks grim.

“Prolonged political tensions along with higher interest rates and inflation seem to be taking a toll on consumer morale, which dipped again in June due to sharply lower expectations for job prospects and the general economic situation. (…) And these (local issues) offer little reason for optimism. Never-ending (and rising) political tensions, higher inflation, higher interest rates, shaky fiscal position and countless fiscal changes all add up to create a grim picture for the months ahead,” ING Bank analysts said in a recent research note.

On May 7, Romania’s central bank raised the monetary interest rate from 2.25 percent to 2.5 percent, the highest level since February 2015, in line with economists’ expectations, who see the decision as a consequence of upward revision of the inflation forecast.

Analysts say the 3-month money market rate should be above the central bank’s policy rate.

Romania’s central bank also had weekly open market operations during the last couple of months, absorbing excess liquidity in the market. On June 25, Romania’s central bank absorbed only RON 54 million through one-week deposit tender, compared to RON 5.5 billion on June 18.

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