The National Bank has cut its key interest rate onRON-denominated loans by a quarter of a percentage point, to a newall-time low of 6.25%, but the signal to make loans cheaper comestoo late, now that the economy is down and appears not to have thestrength to pick itself up.
Last year, when the effects of the crisis, which started in 2008,were fully felt, and the economy fell by 7%, the NBR was very slowto cut the interest rate, from 10.25% to 8% a year, for fear ofinflationary pressures and of a RON depreciation. On neighbouringmarkets central banks were quick to cut interest rates, even belowinflation, in order to stimulate lending, and their economies copedwith the crisis better.
Only in 2010 did the Romanian central bank cut the interest rate ata faster pace, with cuts amounting to 1.75% in just four months.But now companies are struggling to cut costs after their marketscollapsed, and redundancies mean people have less money to spend,which creates a downward spiral.
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