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Commercial banks should be more cautious in lowering interest rates

Romanian commercial banks should be more cautious in lowering interest rates amid low levels of savings and avoiding shortages in financing economy in the future, the central bank governor Mugur Isarescu was quoted by the local press as saying.

"I don't believe that Romania can afford to discourage saving process, as it is important for investments and economic activity," Isarescu said during a press conference. He admitted that an surplus in savings still exists, taking in account the commercial banks' manner of credit policy.

But he added that this surplus might disappear if investment financing remains high. "Interest rates for attracted deposit should be in line with annual inflation which stands at 16, 17%," Isarescu said. "Any further cuts in the absence of a significant drop in inflation rate, may jeopardise banks' capability to finance new investments", he added.

Isarescu said there were no guarantees that fresh foreign inflows would be enough to cover domestic investment needs as long as world economy was in recession.

(NewsBase 25.iv.03)

 
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