RSS
Central Bank's Isarescu: BNR's fundamental goal, to ensure prices' stability
The central bank (National Bank of Romania, BNR, ed. n.)'s governor Mugur Isarescu says in answering to the letter released by Speaker Liviu Dragnea, after a meeting he had on Thursday with Prime minister Viorica Dancila and BNR governor Mugur Isarescu, that the central bank's fundamental goal is to ensure the prices' stability, in accordance with the national law and the EU norms, this being the best contribution a central bank could bring to the durable growth of the economy.
Isarescu mentions that the decisions made by the Board of Directors of the BNR in its 8 January and 7 February sittings were aimed at adjusting the behaviour of the monetary policy in the context of a significant and fast increase of the inflation rate in the last months: the yoy inflation rate calculated by the National Institute of Statistics (INS) based on the Consumption Price Index parked at 4.3pct in January and 4.7pct in February 2018 (beyond the upper limit of the target's variation interval), as compared to 0.8pct in June 2017.
The BNR governor specifies that a possible lack of reaction by the BNR, in both the first two months of 2018 and in the perspective would amplify the risk to land the inflationary expectations at a new, increased level because the economic operators, the international bodies included, would have interpreted the BNR's lack of reaction as a tacit acceptance, on the medium and the long term, of the respective inflation level. Moreover, the risk of the national currency's additional depreciation would have increased.
Isarescu also said that such a context could generate new inflationary pressure and the commencement of an inflation-depreciation-inflation cycle, considering that the BNR cannot fight in any circumstances at at any level of the interest, the pressure on the currency market, in particular if they are fed by the change of perception of the investors upon the national economy.
The BNR governor also specified that an adequate mix of policies is highlighted by the BNR each and every time and is to be read in the releases of the Board following the sittings that decide measures of currency policy, and the permanent positive work between the BNR and the Public Finance Ministry is known and it is materialised, for instance, in the past months in the getting of two gainful loans for Romania from the international capital market. The collaboration is also taking place within the institutionalised framework, according to the law, of the National Committee of Macroprudential Surveillance.
According to Isarescu, the integral take over by the BNR of the administration of the aggregated demand (so to diminish the surplus demand) and the stoppage of the deterioration of the external position of the economy presumes the more intense use of the monetary policy tools, which would involve a more accentuated increase of the key interest rate.
"Should the central bank does not adopt any measures and assists passively to the risk accumulation, apart from the fact that it would break its legal mandate, its attitude would increase the risk of an abrupt adjustment, operated by the market forces, with a severe impact upon the economy," says Isarescu in his letter.
The Speaker of the Chamber of Deputies Liviu Dragnea says in a letter made public on Friday, after the talks he had on Thursday with Prime minister Viorica Dancila and the National Bank of Romania (BNR)'s governor Mugur Isarescu, that the BNR is inducing a state of mistrust in the gov't, and in this respect, 'I find the monetary policy must be in harmony with the government policies.'