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Isarescu: BNR is ready to avert the swaying shifts of currency exchange rates

BNR is ready to act in response to swaying shifts of the currency exchange rates, said the governor of National Bank of Romania (BNR).

Moreover, Isarescu said it was necessary a manageable adjustment of the leu as well as other emerging currencies in the region. "It is necessary a certain lineup of currencies in the region, but the drastic decline of the local currencies can create shifts that could cut the economic balance and must be avoided", Isarescu added. BNR governor justified the "necessary correction" of the currencies with a flexible trend in the region by the existence of foreign imbalances in case of Romania, Hungary, Czech or Poland.

'09 Inflation Target, Very Likely To Be Reached

Romanian central bank's inflation target of 3.5%, with a one percentage point variation band, for 2009 is very likely to be attained, the central bank's governor Mugur Isarescu said Monday. "I think there are high chances that the inflation target for 2009 to be attained," Isarescu said in a press conference.In 2007 and 2008, Romania's inflation rate was higher than the central bank's target.In January, Romanian consumer price index rose by a higher than expected 1.24%, compared with the previous month, and the annual inflation widened to 6.71%, from 6.3% end-December, according to the National Statistics Institute data.The annual inflation rate was 6.3% at the end of 2008, down compared to 6.57% in December 2007, but 1.5 percentage points above the upper limit of the variation band. Last year, the central bank's target interval was at 2.8-4.8%, while the target for 2007 was at 3%-5%.

Romania's Central Bank, Govt Analyze External Loan Conditions

The National Bank of Romania analyzes, together with Government representatives, the right amount to be borrowed from external markets, at the most favorable costs and with a reasonable payback calendar, the central bank's governor Mugur Isarescu said Monday.Isarescu added the sums discussed in recent weeks in various circles are "categorically exaggerated."Isarescu also said Romania as an European member state should consider the European funds, and that currently there is an evaluation undergoing as regards the absorption capacity. He said both loans from the European Union and additional loans from the European Investment Bank are evaluated. Isarescu added he takes into account also funds from the International Monetary Fund, the World Bank or the European Bank for Reconstruction and Development. Isarescu said last week an eventual loan from the IMF should be included in a package of agreements between Romania and other European institutions, such as EIB or EBRD.

 

Romanian economy might register demand deficit after Q1

The Romanian economy might record a deficit in demand after the first quarter of the year on the background of the 'massive moderation' of the wage growth, Governor of the Romanian National Bank (BNR) Mugur Isarescu stated on Monday.'Our figures indicate the excess in demand is close to its end and that we might see a deficit in growth after the first quarter of the year instead. We are currently witnessing such massive moderations in terms of wage growth on the private segment, which get the revenue behaviour close to a growth in productivity,' Isarescu said. Inflation might not be a problem in 2009, with Romania risking in fact a disinflation (a drop in the prices) in the following months, due to the drop in the private consumption and the sudden adjusting of the public consumption (administration), economic analyst Liviu Voinea, general manager of the Group of Applied Economics (GEA) has recently told Agerpres.

The BNR governor also stated on Monday there exist big chances of the inflation target scheduled for this year, of 3.5 percent (plus minus 1 percentage point), being reached in the end.

BNR liquidity injections over past two months equal 8 pct cut in RR

Liquidity injections by the National Bank of Romania (BNR) into the market over the past two months are tantamount to an 8 pct reduction in the reserve requirement (RR) for the banks' liabilities in the local currency, the leu, BNR governor Mugur Isarescu told a press conference on Monday. The liquidity injection had become necessary because in the last three months of 2008 the public deficit had widened to 3 pct of the GDP. 'We succeeded in financing the budget deficit. The alternative - halting financing - would have been dramatic,' said the BNR governor. The cut operated in November in the reserve requirement for commercial banks' liabilities in local lei was a mistake, governor Mugur Isarescu commented recently. On Oct. 30 the BNR Board decided to cut for one month the minimum mandatory reserves for liabilities in lei from 20 to 18 pct, effective between Nov. 24 - Dec. 23. The effect of the measure, which had been mainly intended to re-launch lending, was the release of some 2 bln lei on the market.

Following the decision, BNR sold foreign currency to sterilize market liquidity. Referring to the depreciation of the currencies in the region, Isarescu said that Romania's edge over the neighboring states is given by the high level of the reserve requirement and the monetary policy interest rate. 'We have the main monetary policy instruments - the RR and the key interest rate we did not rush to cut - as elements to differentiate Romania from the rest of the region,' said Isarescu.

The BNR governor explained that the RR has grown into an advantage and its high level makes it possible for the central bank to keep the exchange rate stable.

 

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Tags: central romanian target banks mugur deficit european monday inflation region currency shifts bnr exchange governor currencies romania national isarescu

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