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BNR's Isarescu: Consumer price index very likely to enter 2.5pct plus/minus 1pct fluctuation band

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Mugur Isarescu

The National Bank of Romania (BNR) will fulfill its two mandates this year - price and financial stability, BNR Governor Mugur Isarescu said on Monday at a news conference where the bank's report on financial stability was released, noting that in all likelihood the consumer price index will enter the fluctuation margin of 2.5pct plus/minus one percent.

"A careful reading of the report indicates that we prepare the idea that the National Bank this year fulfills its two mandates. The price stability mandate: in all likelihood, there is still a month indeed, the consumer price index will enter the fluctuation band of 2.5pct plus /minus one percent. And there will be a problem, I'm sure, because some prices are rising while the index is decreasing, and prices are increasing, as a rule, in December. There will be a big brouhaha: why is the index going down while prices are going up? When the consumer price index is 3.5pct, it means prices have gone up. They grow less than they did last year," said Isarescu.

The governor also said that the BNR will fulfill its mandate in terms of financial stability, arguing that the fact that there are vulnerabilities and risks does not mean that the mandate has not been fulfilled.

In the same context, Isarescu reiterated that the press sometimes distorts the standardised language used by the National Bank.

"When we say risk, we meant it. We do not mean projections. When we say that the market economy has a cyclical evolution in general, and that after a few years, looking back to how the market economy has behaved and knowing that the cycle last 7-10 years, on average, we look at other data, and we say there is a risk of a slowdown and then of a recession, it does not mean that we have made a forecast. So, there is, I would argue, a big difference between what we say - 'there is a risk of a slowdown and then of a recession' - and statements such as 'the National Bank forecasting recession, forecasting disaster.' And to add more weight they say in their news crawlers: 'Hard warning' - I like the word hard, but some of you are overusing it - 'A hard warning from the governor.' In the morning, I kept waiting to see some hard warning of mine, and I did so for one hour. I nearly missed my shaving. Nothing came out. Something came out about prices but the crawler was clear about me issuing some hard warning," said Isarescu.

He concluded that the bank's message regarding the twin deficits was that a possible recession should not take Romania unguarded, namely with large deficits, because the country won't be able to defend itself.


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