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Popa: Energy prices found in food; BNR tries to balance these “second round effects”
Energy price were sent to food, while services felt less of a shock, being less intensely energetic, while the National Bank of Romania ( BNR) is trying to counteract these “second round effects”, Cristian Popa, a member in the BNR Administration Board wrote on his Facebook page.
“Inflation pressures remain ample, this time behind the inflation evolution there were food products, energy prices were practically sent to food, while services felt the shock less, being less energetically intensive. The transmission rate, the influence of energy price increase in the rising price of food, is very rapid and strong. Maybe only the exchange rate can have a higher transmission rate than energy prices. BNR is trying to counteract these second round effects, generated by energy prices, through a certain stability of the exchange rate. Higher interest rates help us for exchange rate stability. If we are at less than half the inflation rate with interest rates and with monetary policy interest rates lower than in Hungary, Poland and Czech Republic. Second round effects will continue and BNR, knowing that monetary policy cannot stop the energy crisis or military conflict, has increased the interest rate by 0.5%,” Popa wrote.
He mentioned that measures were taken by the book. BNR began in sprung last year by stopping the purchase of state bonds, the firm control of cash flow and rising interest rates.
“Measures will continue, they have to. Moreover, economic growth is losing down, positive gap is closing, reducing inflation pressures from demand. We have a major problem, which we know is difficult to solve I the middle of a major crisis (pandemic and war at the border): we have two major deficits. These are the fundamental problems. We entered pandemic with the biggest deficits, and we are getting out of it in the same way,” Popa showed.
The annual inflation rate went up to 10.15% in March 2022, from 8.53% in February, in conditions in which non-food products were more expensive by 10.86%, foodstuff by 11.20% and services by 6.53%, according to data supplied by the National Statistics Institute on Tuesday.