The evolution of ROBOR is consistent with the monetary policy framework and inflation, the main economic benchmarks influencing money market interest rates, according to Csaba Balint, a member of the Board of the National Bank of Romania (BNR), in an article published on Thursday on the BNR Opinii blog.

'ROBOR may seem favourable or unfavourable, too high or too low, depending on the perspective. But if it is analysed through the two fundamental benchmarks discussed here - the monetary policy framework and inflation - its evolution appears consistent with comparable interbank rates in the region,' Balint wrote in the article entitled 'ROBOR between public debate and economic benchmarks'.

According to him, 'money market interest rates - and ROBOR in particular - can be viewed from several perspectives.'

'Borrowers see them mainly through their monthly repayments. Banks view them as a funding cost. Lawyers focus on the regulatory framework. Policymakers consider their social impact. These are just a few possible perspectives, but each is legitimate and important,' Balint added.

In an intense public debate, differing perspectives can easily generate impressions, emotions and labels, the BNR official noted.

'ROBOR may therefore be perceived as too high or too low, sometimes even as favourable or unfavourable. But such labels say more about how ROBOR is experienced than about the economic factors it is supposed to reflect. Above all, ROBOR remains a money market indicator. The key economic question is one of consistency: to what extent does it reflect the fundamental economic benchmarks? If we step back and return to the basic logic found in economics textbooks and courses, the question becomes clearer,' he wrote.

In his view, a money market interest rate cannot be analysed in isolation, as 'it largely reflects the cost of money'.

'This cost depends on many economic principles, market mechanisms and practical conditions - from expectations, liquidity and risk to the broader financial context. But at the level of the most basic economic benchmarks, two elements appear essential: the monetary policy framework and inflation. The first benchmark is the monetary policy framework. In a market economy, interbank interest rates must respond to the direction of monetary policy,' Balint said.

Otherwise, monetary policy would not be properly transmitted throughout the economy. In simple terms, interbank rates should generally remain close to the interest rates set by the central bank, he added.

'If we look at average levels during the period Q4 2018 - -Q4 2025 (for which IRCC data are also available), the first important observation is that all ROBOR and ROBID rates remained within the monetary policy corridor. Interestingly, the simple average of these rates is almost identical to the policy rate (4.22% versus 4.26%). There is also a slight upward slope in rates as maturities increase. Such a slope may have several explanations. The simplest is the term premium: a longer maturity may include a premium, just as longer-term deposits are generally rewarded with higher interest rates,' Balint explained.

According to him, the IRCC benchmark is also 'aligned with interest rates on the short-term segment of the market'.

From this perspective, ROBOR has behaved similarly to interbank rates across the region. In short, the data are consistent with basic economic logic: where inflation is higher, interest rates also tend to be higher, the article notes. AGERPRES (RO - writing by: Nicoleta Banciulea; EN - writing by: Cristina Zaharia)