Dijmarescu: Foreign currency interventions are permitted

Foreign currency interventions are permitted, but they have to be subordinated to the inflation goal, says NBR vice-governor Eugen Dijmarescu, who is in charge of the market activities of the central bank. Dealers have been constantly speculating since mid July on the supposed resumption of the NBR’s interventions on the exchange rate; first to put a damper on the spectacular appreciation of the RON and then to stimulate the correction phenomenon. In a presentation titled “Aspects of monetary and foreign currency policy in the context of the implementation of the Convergence Programme” Dijmarescu reiterated the “unequivocal” commitment of the NBR to setting prices, which excludes targeting any goal other than inflation, be it the exchange rate or economic growth. When talking about the “characteristics” of the exchange rate policy conducted by the NBR, the vice-governor mentioned two main coordinates: increasing the flexibility of the exchange rate, although maintaining the controlled float system at the same time, and the coexistence of the trend of appreciation in real terms and the short-term variation of quotes. It remains to be seen how far the current correction of the exchange rate of the RON against the euro can go without creating inflationary pressures, considering prices are more sensitive to such exchange rate adjustments compared with the appreciation.