Banks want more, more, more (think of Billy Idol song)

Fear of capital flight makes NBR a stingy central bank. For the REPO operation today the local banks were looking to borrow 24 billion RON (blue line) at 5.25% for 7 days. The NBR saw through that and only accepted 6 billion RON worth of RON denominated bonds. Continue reading “Banks want more, more, more (think of Billy Idol song)”

To reach its potential Romania needs to “relax”

I am not a fan of “output gaps”, this measure of how much are resources in the economy employed. But central banks all over the world use it and thus we have to at least mention it.
In theory an output gap shows how far is the economy from its potential. A positive gap means that current GDP is above its long term potential while a negative one shows that the opposite. Continue reading “To reach its potential Romania needs to “relax””

Current way of injecting liquidity will not lower long term rates

NBR delivered another rate cut today from 5.75% to 5..5%. It is the third consecutive cut in the key rate and a good moment to see how has this easing cycle transferred into the real economy. The main question is if these rate cuts get to the real economy. As you will see not immediately and definitely not via lower interest rates.
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Continue reading “Current way of injecting liquidity will not lower long term rates”