Ooni Koda
  1. Home
  2. /
  3. Newsfeed
  4. /
  5. OTP Bank Romania analysts : the political crisis and...

OTP Bank Romania analysts : the political crisis and high inflation impose new growth of the interest rate

November 18, 2021

The OTP Bank Romania analysts consider that until the end of year there will be a new adjustment of monetary policy, as in 2022 the key reference will cross the threshold of 2% and the political crisis and high inflation impose new growth of the interest rate.     ‘According to the OTP Bank analysts, the increase of 0.25% of the monetary policy interest made by the National Bank of Romania is the first step in a series of necessary growth of the interest rates to balance the effects of the political crisis and the inflation growth. The increase of the key reference at 1.5% at the beginning of October by BNR is an adaptation to the conditions of the market and influence of the international trends. The recent signs which indicated this evolution where the growth of interbanking interest and the growing change of the curve of international yield which grew and the risk cost for Romanian assets’ the bank shows.   While the European prices for electricity continue to grow, the domestic political uncertainty deepened, being a risk for the local fiscal consolidation.    ‘Since the beginning of 2021, and especially since the summer of this year, many conditions have changed. The central banks started to evaluate more carefully a permanent growth of inflation, and the curve of the yield of the big economies started to move upwards. The higher rates in the US and the euro zone contribute to the increase of the risk premiums for assets on the emerging markets, which push the evolution of the interests in Romania and the region on an upward trend. Moreover, there are domestic factors which indicate a future strengthening of monetary regulation, the inflation getting to the level of 6.3% at the end of September, and the estimates indicate a slight continuation of this growth until December at least’ the OTP Bank analysts appreciate.   They consider that until the end of the year there will be a new adjustment of monetary policy, so that in 2022 the key interest passes the threshold of 2%.    ‘There are several reasons for which we expect growth of the rate in the future, but we have to remember that both the yield curves of the US and the euro zone have increased gradually, which leads to a growth of the financing costs for the emerging economies such as Romania’ they say.   Such growth makes it less possible that the appreciation of inflation be temporary. The logistic blockage and the high prices for electricity will keep the inflation at a higher level than the one estimated initially for next year as well. Then, at international level, there are expectations that the Federal Reserve start in November the introduction of regulation measures, while in December the ECB could reduce the acquisition of assets.   Similarly, the domestic factors indicate a higher interest rate.   At the end of September  inflation reached the level of 6.3% and the inflation rate at the end of the year could reach even 8%if a supplementary growth of the price of electricity for the user sis adopted, taking into consideration the evolution of the international market of gas.   Although the largest part of this growth does not reflect in the basic inflation, as it is caused by the higher prices for electricity, taking into consideration the strong economic recovery and the decent growth of salaries, there is the risk that expectations referring to inflation to grow, which could lead to an inflationist spiraling.   Finally, the risk cost for the local assets was fed by the domestic political uncertainty and the fiscal fragility, Romania having a structural deficit of almost 7%, probably the highest in the EU.   The increase of key interest for the adjustment and normality of the monetary policy will have during this first period a reduced effect on inflation, taking into consideration there was more of a reaction to the increase of interbanking interests. It will contribute to the keeping of a strong national currency, while it leads to the growth of interest rates for loans and deposits. Thus, the activity of saving will be stimulated and it will limit expenditure at general level, with effect of keeping the inflation under control.   Even so, the OTP Bank analysts appreciate that next year inflation will be lower due to the fact that the effect of growth of prices for electricity will be reduced until the second semester.   OTP Bank Romania, subsidiary of OTP Group is an integrated supplier and auto-financing of financial services. The bank has occupied the 9th position, depending on assets, in the ranking of bank players in Romania since December 2018.   OTP Group has over 70 years of activity in the financial sector of Central and Eastern Europe, while the subsidiary in Romania has accumulated 16 years of presence on the local market. The community of almost 40,000 employees serve daily almost 16.3 million clients in 11 countries.  

Read in full - click here
Venice Film Festival: Romanian director Cristian Mungiu, member of this year’s jury

Romanian director Cristian Mungiu will be part of the jury that will judge the films in the main competition of this year’s Venice Film Festival - Venezia 82. The jury, headed by American director Alexander Payne, includes French director and screenwriter Stéphane Brizé, Italian director and screenwriter Maura Delpero, Iranian director and writer Mohammad Rasoulof, Brazilian actress, writer, and […]

Council of Europe report: Romania among six European countries facing severe prison overcrowding

Romania continues to face significant prison overcrowding, according to the Council of Europe’s latest data, released on Friday, July 18. The 2024 Annual Penal Statistics on Prison Populations (SPACE I) show that Romania is among six countries in Europe with severe overcrowding, housing 116 inmates for every 100 available places. The report, which...

Chris Hemsworth's surprise drum performance with Ed Sheeran in Bucharest featured in new ‘Limitless’ season

Chris Hemsworth returns to Disney+ in August with a new season of the National Geographic documentary series Limitless, this time focused not just on longevity, but on discovering how to live better. Titled Limitless: Live Better Now, the three-part season follows Hemsworth through physical, emotional, and mental challenges across six countries, with one standout episode […]

Black Sea 200 Regatta 2025: First non-stop offshore regatta in Romania takes place this month

The Black Sea 200 Regatta 2025, Romania’s first non-stop offshore regatta with a 200 nautical mile route, takes place between July 21 and 27. Now in its first edition, the event brings together more than 10 boats from Romania and Bulgaria, according to the organizers. The endurance course will start and finish in the Romanian […]

Illegal zoo in southern Romania fined for environmental and animal welfare violations

The National Environmental Guard has fined an illegally operating zoo in Dâmbovița county, southern Romania, a total of RON 120,000 following a joint inspection that uncovered serious violations, including the lack of environmental authorization and inadequate conditions for wild animals kept in captivity. The zoo was reportedly charging RON 50 per person for entry and […]

Romania’s cybersecurity agency and Enevo join forces to protect energy infrastructure

The National Cybersecurity Directorate (DNSC) and engineering company Enevo Group have signed a strategic cooperation agreement to strengthen cybersecurity in Romania’s energy sector. The partnership aims to test and develop monitoring and alerting technologies for cyberattacks, and to improve national response coordination to incidents affecting critical infrastructure, the companies said. The agreement focuses on sharing […]