European Commission on monetary policy

Romania’s monetary policy has contributed to lower inflation and increased macroeconomic stability, concluded the European Commission report on Romania. “New challenges are emerging, however, with strong capital inflows attracted by the relatively high Romanian interest rates,” the EC experts warn. These inflows have necessitated sterilisation operations by the central bank in order to neutralise the effect on inflation. Faced with the already rapid growth in credit, the widening of the current account deficit and continuing inflationary pressures, the authorities decided to delay the liberalisation of non-resident access to domestic deposit accounts denominated in ROL, originally foreseen for the beginning of 2004, in order to stem further credit growth and calm potential volatility in the balance of payments. “The situation illustrates how attainment of a higher degree of macroeconomic stability remains an important objective for Romania, as it would allow liberalisation to happen as planned, without raising fear of adverse economic effects that could limit the effectiveness of monetary policy,” the EC report said. ZF