The National Bank of Romania (BNR) took Romania's financial market by surprise on Wednesday by cutting the benchmark rate by half a percentage point, to an annual 9.5 percent from 10 percent. Moreover, the central bank decided to maintain the cash reserve ratio (CRR) on foreign currency and lei liabilities at 40 and 18 percent, respectively, Business Standard reported.

Most market players expected the key interest rate to be maintained at its 10 percent level. Furthermore, some economists labeled a 0.25 percentage point cut a brave act, which would be a sign of the central bank's optimism regarding the evolution of the Romanian economy.

Analysts and bankers took this measure as a sign of a looser monetary policy and concern by the central bank that lending be re-launched.

"It is a clear signal that interest rates must drop. Even if this does not happen immediately, interest must decline. There are many banks with sufficient liquidity that should cut loan prices. However, lenders should cut interest rates by several percentage points to make these attractive," Dan Pascariu, Chairman of the Supervisory Board of UniCredit Tiriac Bank, told Business Standard.

Source: Business Standard