Barclays’ analysts see the key rate slide in rapid steps of even half a percentage point, and hit 5% in mid-2012.
JP Morgan has a similar outlook, having recently slashed its economic growth projections to 1.2% for this year and 1% for 2012. JP Morgan analysts implicitly expect BNR to reduce its key rate possibly as early as the fourth quarter of 2011. JP Morgan had previously forecast BNR would raise its interest rate.
The same scenario was quoted by Erste/BCR, which saw the key rate climb in the first half of next year. Meanwhile, following data on second quarter GDP trend, the analysts of the biggest bank on the market also changed their mind, but not as drastically as their American colleagues: they no longer expect the key rate to rise, but they do not see declines, either, with the interest set to stay flat at 6.25% during next year, as well.
Between these two scenarios-a rapid interest decline and stagnation in 2012, French SocGen projects a slight monetary policy easing in the first half of next year, with a 6% interest rate per annum. RBS also sees a key-rate decline tendency as possible, to 5.5% at the end of next year, but does not rule out the possibility of the current level being maintained for another year, either.
However, a firm verdict against the BNR key-rate cut assumption comes from ING Bank: “Given that the recent inflation decline is temporary, being generated by seasonal factors, as well as that there are high risks for high inflation (especially in 2013), we believe expectations for a monetary policy rate cut in the following months are not right.”
Nicolae Chidesciuc, chief-economist of ING, argues that, according to the inflation direct targeting strategy BNR pursues at least formally, the central bank has to consider medium-term inflation outlooks and not short-term ones.
And yet, there’s an interest rate decline expectation shaping up at market level, so that BNR should materially support the slogan of spurring domestic currency lending and implicitly help the sluggish economy, as long as inflation is no longer such a big threat.
“I would have expected BNR to raise the interest a long time ago. Now, I really do not believe it has arguments not to,” says Sebastian Vladescu, a former finance minister.
The economy advanced by just 0.2% in the second quarter against the first, indicating an unexpected slowdown. All the hopes for the second half of the year are now tied to agriculture, but it will be difficult for the sector to support GDP growth for two years in a row given the major dependence on weather conditions.
(English version by Catalina Apostoiu; Editing by Loredana Fratila-Cristescu)