Even a 0.1% decline shows in the cost of a loan, considering the low interest rates. The average interest for new retail loans stood at 6.6% per annum at the end of November, one of the lowest in recent years.
“The ROBOR decline is connected to the inflation level and market liquidity. Inflation, too, is at its lowest after 1990, and disinflationary expectations are high following the VAT drop to 20%, therefore it is only natural that transactions on the interbank market would reflect that,” explains economic analyst Dragos Cabat, managing partner of RisCo.
Romania has been experiencing negative inflation since last summer, which is a first in 27 years.
ROBOR’s drop below 1% happened only one day before Romania’s central bank monetary policy meeting. The board of governors will meet on Thursday to decide what to do about the key rate level. Most analysts expect it to keep the rate unchanged at 1.75% per annum, an all-time low itself.
ROBOR’s has been dwindling over the past few weeks because of the high liquidity of the market. Analysts say banks have more cash than they can invest via lending, and this translates into the liquidity level on the market.
When will Romanians be able to feel the drop in ROBOR? Mostly likely in March, when most banks update their interest rates on the variable interest loans, something they do once every quarter. Back in December when the latest adjustment took place, ROBOR stood at 1.1% per annum.
Will ROBOR continue along the same lines in 2016?
“We expect a gradual adjustment of interbank rates and their synching with the monetary policy rate to begin towards the end of the year. The short-term prospects show ample liquidity on the interbank market,” said Ciprian Dascalu, chief economist of ING Bank.
“We expect the monetary policy rate to end the year at the current 1.75% level and the interbank rates to be close to it.”
In other words, the three-month ROBOR will remain at around 1% if Romania’s central bank keeps the key rate unchanged.
(English version by Loredana Fratila-Cristescu)