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Isarescu : We are close to the limit of prudence but creditation does not start

The central bank is close to the limit of prudence and let much liquidity on the financial market, but creditation does not restart, Mugur Isarescu stated on Thursday in an interview to The Money Channel.

The National Bank of Romania tried last year to boost the resumption of economic growth through the reduction of monetary policy interest, but the policy of the central bank had no effect on the commercial banks as they did not reduce the interest.

« Last year we (BNR) tried through our monetary policy to boost the economic growth, we reduced the interest, we had anti-cyclic monetary policy. We reduced the interest,the banks didn't. And now we are doing the same . We have left so much liquidity on the market. We are close to the limit of prudence from the viewpoint of a central bank, and creditation does not start again » Isarescu said.

He compared Romania's economy to a car which skidded and needs repairs to go on.

« The fact that we skidded means that you have to take the car out of the ditch before seeing what is wrong with it, repair it and then start. To get out of a pro-cyclic policy is very difficult, you have to cut, to stop, to discourage in order to find a balance » the BNR governor explained. The BNR governor said that a solid monetary policy is not enough to help economic growth, if the fiscal policy goes wrong. « A tough monetary policy and a weak fiscal policy do not mix well » Isarescu said.

He mentioned that 2011 will not be easy from the point of view of decisions the central bank has to take, but he repeated that the main objective of the BNR is to establish prices and financial stability.

Bankers in Romania hope that the creditation activity starts again in 2011 in a sustainable way, especially due to refinancing, after the austerity measures adopted by the government last year affected the capacity of the population and of the companies to get into debts.

The balance of the loan offered to the population and the companies was reduced over the ten months of 2010 by 4.7% in real terms, as compared to the similar period of 2009.

Sursa: http://www.actmedia.eu

Tags: start monetary policy isarescu creditation prudence close limit car bnr

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