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Romanian Inflation will remain under the inferior value of the variation corridor estimated by the central bank, towards 1.5%, at least for a few months, mainly due to lower than expected international oil prices, said the governor of the National Bank of Romania, Mugur Isărescu. NBR target for this year was of 2.5%, plus or minus 1%.
“Our forecast shows the maintaining of the inflation in a sensible manner, of the rate below 1.5%, at least for several months. So we will live several months with a low inflation (…) the main factor for the reestablishment of the inflation in an inferior trajectory curve is the oil price. He declined much from the figures we had in mind in summer and autumn, when we developed earlier forecasts”, said Isărescu, quoted by Agerpres.
He stressed that the central bank is prepared for such situations and has all the tools available, unlike other central banks that have cut the interest rate to zero.
“We still have a large enough field of action; we have this tool to manage liquidity in the banking system, not to speak of minimum reserves, where the field is excessively large. There we will probably take measures for several quarters from now on”, said the Governor.
He admitted that inflation is likely to increase if the price of a barrel returns towards USD 80, but, in his opinion, the oil dependent countries will train greater falls in price, because they will sell more to cover expenses.
Referring to inflation in the euro area, that shows the entry of this index into a negative area, central bank governor says that it is premature to assess whether it is a temporary or lasting phenomenon.
“The figures show that we are living in the euro area with a negative inflation. Probably is now me to give the verdict if this is deflation or not, whether it is a temporary phenomenon or a long one”, said Isărescu.
“People are starting to believe that a cycle of falling prices comes, and then expectations are reversed, i.e. people postpone buying, waiting for the price to drop, which means an economic downturn”, said the head of the central bank.
