The worst hit by the rise in inflation are the people or companies who put their money in the banks because neither the exchange rate nor the ROBOR have reacted to it as a result of the adequate supply of cash on the market.
“At a 5% inflation rate, the leu depreciation should, theoretically, be 5%. The exchange rate is stable, and the ROBOR is not going up because the market is very liquid. There is a general distortion caused the ‘quantitative easing’ and not just in Romania,” economic analyst Dragos Cabat says.
On Thursday April 12, the leu/euro rate was 4.66 lei to one euro, compared with 4.63 lei to one euro in December 2017. The three-month ROBOR (the reference rate used to calculate leu loan interests) stood at 2.07% compared with 2.05% in December 2017. These are insignificant depreciations, as one can easily see. Therefore, despite the inflation, the exchange rate and the interest rates being tightly connected, those who bear the brunt of the inflation, beyond the effect all consumers feel, are those with deposits in banks because the deposit interests stand at up to 2%, while the inflation has reached 5%.
Non-governmental resident clients’ deposits stood at 306.6 billion lei (lei and foreign currency) at the end of February up 12.9% on February 2017. Out of this amount, RON208.4 billion were leu-denominated deposits (and thus dependent on ROBOR) while RON98.2 billion were foreign currency deposits (dependent on the exchange rate).
Romania’s central bank governor Mugur Isarescu has repeatedly asked banks to raise interests on deposits, with the latest such request coming early this month when the central bank decided to keep the monetary policy rate unchanged at 2.25% after having raised it twice.
The governor admits there is liquidity on the market but says this is only temporary.
The central bank sees inflation at 2.5% at the end of the year, plus or minus 1%. Financial analysts think it will be higher, though.
“Financial analysts expect inflation to reach 4% by yearend,” says Adrian Codirlasu, chairman of CFA Romania.
(English version by Loredana Fratila-Cristescu)