Update2 – BNR Governor Isarescu points to PSD governments for the increasing prices, warns of risk of hard landing. PSD’s Dragnea, dissatisfied

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National Bank Governor, Mugur Isarescu, has explained to the Senate’s economic committee the price increases and the inflation developments in recent months. Isarescu was accompanied by the entire board of the BNR.

The social-democrat senators did not attend the meeting, realitatea.net reports.

Governor Isarescu was invited to Parliament for explanations, including by PSD leader Liviu Dragnea.

In an unprecedented move, the BNR officials have warned about the risk of hard landing for the economy, antena3.ro informs. Governor Isarescu said that, if the expenditures are not withhold, economy risk hard landing. In turn, Vice-governor Florin Georgescu has pointed to the undesired option of painful decisions for the population, which could lead to tensions within the society.

He showed that the factors that led to higher inflation are coming from the PSD-ALDE governments that have made the economic policy over the past year.

“The price increases, reflected in the evolution of the inflation index, reflect the action of some fundamental factors, first of all by the strong inflationary pressures on the demand side, secondly, by the wage cost increase,” the BNR governor explained.

Practically, Mugur Isarescu has pointed to the PSD governance decisions: the stimulation of demand was the result of the consumer-led economic growth, and the wage cost increases are also the result of the Executive’s Macroeconomic Policy, realitatea.net reports.

The Governor has also explained the successive decisions of increasing the key monetary policy interest rate. “If not, there would be a risk of leading the inflation to very high levels. We would have risked witnessing sudden increases of the key interest rates.”

Mugur Isărescu has also presented the phenomenon of higher inflation in a regional context.

“It was said that in other countries with which we can compare, the Czech Republic, Poland, Hungary, the rates remained unchanged, or rose marginally. The question was why the BNR has rapidly increased the monetary policy rate in January and in February. The situation in Romania is different against the one in the mentioned countries. In these countries, the annual inflation rate was within the target set, while in our country it was above the target – 4.7% in February, with the risk to stabilize at that high level,” Mugur Isarescu said.

He added: “The real inflation was hidden by the fiscal measures in 2017, such as VAT cuts, so if we calculate the inflation rate without the fiscal impact, it was not so negative in the first half of last year.”

The PSD senators from the Economic Committee have boycotted this hearing. It seems to be a new stage of the war between the representatives of the ruling coalition and the BNR officials. Florin Cîţu, the chairman of the committee, is the one who launched the invitation.

The annual inflation rate was 4.3% in January, after 3.3% in December, according to the figures of the National Institute of Statistics (INS). Annual inflation rates higher than 4% have not been recorded since 2013. Compared to December 2017, in January 2018, the non-food goods prices increased most (by 1.08% on average), the food prices increased by 0.64%, and the service charges by 0.32%.

PSD’s Dragnea: BNR’s monetary policy – following dialogue with the Gov’t and Parliament

PSD chairman, Liviu Dragnea, has argued on Thursday that “BNR’s monetary policy should be carried out following a constant dialogue with the Government and the Parliament” and said that both the letter sent by him to the Governor and the answer will be made public, hotnews.ro informs.

“I do not want to have a dialogue, for the time being, with the BNR Governor,” Dragnea said while in Focsani, asked by the journalists to comment on the answer received from Mugur Isărescu.

The PSD leader said he was called the day before by Mugur Isărescu, who told him that he had sent him the answer to the letter sent by Dragnea at the end of February.

“Both letters will be made public,” Dragnea said, before adding: “The BNR monetary policy must be carried out following a constant dialogue with the Government and the Parliament.”

Liviu Dragnea said he is willing to debate “whenever” with the BNR leadership “the causes of inflation” and “the way the BNR refinancing interest policy influences the economic development.”

According to Law 312/2004, “the National Bank of Romania is an independent public institution”.


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