BNR's Isarescu: We are looking very closely at inflation trends; if it tends to last we will react

The National Bank of Romania (BNR) is looking closely at the inflation trends, expecting an increase in the first months of next year due to a statistical effect, but if there are to be spurs that tend to last, then it will intervene, Governor of the National Bank of Romania Mugur Isarescu said on Tuesday.

"I tell you that we will look very closely at the trends to see if it is something more or less accidentally, statistically. Statistically, we are expecting inflation to peak in the first quarter. Why? Because last year by factoring in the Value Added Tax (VAT) inflation was very low, and then one-year inflation January 2018 against January 2017, shows an increase, even if the monthly inflation in January next year will not be high. Neither will it be so in February nor in March; so we are expecting such a surge in inflation, but we know that it will be overtaken. There is no point in reacting to it by taking measures that would disturb the economy to tackle something that is only temporary. But, if we see that there is a tendency and an increase in inflation that tends to last, we will of course react," said Isarescu.

He added that in the inflation report he will present on November 9, BNR makes a comparison with Poland, Hungary, the Czech Republic, and also with larger central banks. Based on data and tables it can be seen that in all that countries a fairly large difference is maintained between the monetary policy rate and the actual inflation rate, including in the European Union.

Asked about the domestic risks posed by fiscal policy, he said he hoped they would diminish in the government's meeting on Wednesday.

"We hope that the risks will diminish tomorrow, as I understand there will be a meeting tomorrow. A decision will be made," said Isarescu.

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