NBR: Inflation is a problem. The inflation forecast will be revised upwards

NBR Governor Mugur Isărescu said he would revise the inflation forecast upwards because inflationary pressures are not lessening.

He mentioned the fact that the problem is that both the inflation rise that had occurred since last summer and the new inflationary factors could not be countered using the instruments that the central bank has available.

The NBR should bring this year’s inflation within the 2-4% band. In February the annual inflation rate was 7.6%.

Isărescu talked in an interview with Mediafax about future problems facing Romania and about why the NBR made certain decisions, such as freeing up more than one billion euros for the banks.

He said the last two years’ inflation was of a fiscal nature and there was a risk of pressures of this kind continuing as long as there remained a major imbalance between the number of taxpayers and the number of people benefiting from social assistance.

Isărescu says the NBR is not endangering the resumption of economic growth with its monetary policy measures, and that its anti-inflationary policy is compatible with economic recovery.

The NBR is preparing special measures, most likely prudential ones, to discourage foreign-currency lending for people who earn their income in lei, in line with the European regulation trend.

The NBR reduced the ratio of minimum foreign-currency reserve requirements in order to create liquidity on the market, considering the high foreign-currency repayments of the Finance Ministry, as well as in order to offer flexibility to banks and amid the international events. The reduction of the minimum reserves on foreign currency-denominated liabilities should not be a surprising decision, all the more since the central bank has announced it has a much more flexible approach to the exposures of commercial banks than before.