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The National Bank of Romania (BNR) increasing its key interest rate is determined by inflation in Romania, which is an integral part of global inflation, Adrian Vasilescu, a strategy consultant at BNR, told AGERPRES on Wednesday, adding that the monetary policy rate is really negative.
"Today's measure is determined by inflation in Romania, which is an integral part of global inflation. In 2017-2019 we had inflation also determined by energy, gas and electricity prices, but then the causes were domestic. Now, internal causes are secondary, the main causes are external and the National Bank has made a thorough analysis of this picture and has come to the conclusion that it must take this measure, to increase by 0.50 percentage points its monetary policy rate. You see, it's a real negative monetary policy rate, which is well below the inflation rate. It's a rate that starts with two prudent judgments. Namely, we cannot extract ourselves from the global context. We need to keep in mind what is going on in our world, especially since inflation is coming from outside. That, on the one hand. On the other hand, the National Bank has taken a measure that does not go beyond the coordinates of prudence, in the sense that this monetary policy rate has two effects. It can hit inflation, but not in its energy determinants, because from the the US FED to the Central Bank of Romania no bank can stop the inflation caused by the energy crisis, but they can stop the side effects, the effects on other prices. Electricity has its effects, fuels have their effects; so does natural gas. And not to hinder economic growth. As the statement made clear, economic growth in the fourth quarter already slowed down and should not continue to farther go down. Also, not to hit lending," said Vasilescu, Agerpres.ro informs.
He added that Romania has not had double-digit inflation since 2004, when it fell to 9% from over 10%.
"This is not about Romania. This is about the fact that the numbers follow this trend everywhere. This is about inflation that has not been seen on the whole planet since the 1970s," the BNR official said.
According to Vasilescu, inflation has no domestic causes except for those causes related to the "chaotic style in which the liberalisation of gas and electricity markets was done".
"Just as the pandemic came with global effects, so the economic crisis caused by the pandemic is also global and the crisis of public relations, social relations, caused by the pandemic is also global and this inflation is global with its effects on electricity and natural gas prices," added Vasilescu.
The Board of Directors of the National Bank of Romania decided on Wednesday to increase the monetary policy rate to 2.5% per annum, from 2% per annum, starting with February 10, 2022.
