Romania’s 3M money market rate hits fresh 3.5-year high of 2.73 pct

Sorin Melenciuc 09/05/2018 | 11:44

Romania’s money market rate (ROBOR), the main indicator that sets the interest rates for RON currency borrowers, reached on Wednesday a new 3.5-year record of 2.73 percent for the second day in a row, following the central bank’s move to raise the key rate to 2.5 percent, National Bank of Romania (BNR) data show.

The ROBOR 3M calculated for May 9, 2018, is the highest since October 15, 2014. The 3M rate rose by 0.05 percentage point from the previous market session.

Compared with the end of 2017, the 3-month index rose by 0.68 percentage points, from 2.05 percent.

On Monday, 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.

The Romanian central bank had four open market operations during the last four weeks, absorbing more than RON 18 billion (around EUR 4 billion) in the first two operations, RON 7.9 billion on April 30 and RON 3 billion on May 7 from the banks through one-week deposit tenders.

Romania’s central bank head Mugur Isarescu suggests a “gradual approach” of the monetary policy in order to avoid a sharp RON appreciation.

“As regards Romania, we started the tightening of monetary policy by hiking the rate twice this year, after further narrowing the corridor around the policy rate last year, but a gradual approach is warranted by the need to avoid sharp currency appreciation in the regional context,” Isarescu said on April 27 in Sofia, at The Eurofi High Level Seminar 2018.

Experts estimate the 3-month money market rate will continue to grow until the end of this year, approaching 3 percent, if BNR rises the monetary policy interest rate to 2.75 percent in 2018.

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

The 6-month ROBOR index increased by 0.07 percentage point on Wednesday, to 2.87 percent, a new 3.5-year high.

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