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Isarescu: ”10 bani less in the fuel price is enough to help us with inflation’


Mugur Isarescu, the governor of the National Bank of Romania (BNR) estimated on Monday that inflation in Romania will drop at the end of the year and an important role has the price of oil as Romania is more sensitive to foreign markets.

‘The shocks from abroad are visible faster in inflation in our country than the surplus (the growth of local economy). It was obvious through the crises on the oil market. I was shocked, maybe you too, and I say it is possible to say that the government and the national bank have worked on it to reach the target: the drop in the price of oil drops the price in fuel. I am talking to different people, the drop is very little: only 10 bani. It dropped with 10 bani for fuel, but with the share of the oil and diesel in the indicators of the prices it is sufficient to help us with the inflation. It will be obvious in a few days’ Mugur Isarescu explained, on Monday in a conference ‘ Inflation over the last 10 years’.

The National Institute for Statistics announced the annual rate of inflation for November on 11 December. The inflation of October was 4.3% dropping from 5% in September.

The governor of the central bank said that in the previous years inflation was strongly influenced by the prices for butter, while during other periods by the price of wheat, as the important share of the indicator approximately 40% is represented by the price for food, as the population is poor and these are the main expenses.

‘The simplest for us is  to give inflation down and to try to reach the target through the appreciation of the exchange rate. There were some waves of appreciation of the rate. What shall we do with competitiveness and foreign deficit? This will be seen first in the demand, the deficit of current account.If you drop the inflation, the current account is damaged, you can’t support it anymore, unless the correction comes from depreciation as the productivity surplus does not appear. The political cycle is stronger than the economic cycle, not only in Romania the two cycles get together’ Isarescu said.

As regards the interest for monetary policy the governor said that it had its effect the moment BNR is close to getting its target this year. ‘ If we see the results, the result is that the inflation goes towards the target in December  (…)I am sure they will be dissatisfied even so’ Isarescu said.

More precisely the central bank increased the interest for monetary policy three times this year with 25 percentage points so that from 1.75% as it was at the end of last year it has reached 2.5% as it has been since May.

The inflation target of BNR is plus/minus 2.5% and for the end of this year the institution estimates an inflation of 3.5% in the most recent report on inflation, the one of October