Inflation still stays on the negative side this year, but it will be entering on a growing trend in the beginning of 2017, and at the end of the estimated interval (eight quarters) it will place itself on the superior side of the variation interval, Governor of National Bank of Romania (BNR) Mugur Isarescu stated on Friday.
“The basic scenario of the prognosis reconfirms the fact that the annual estimated inflation rate will remain on the negative side until December 2016. Moreover, the growing trend which this trajectory gets at the beginning of 2017 is reconfirmed. The annual inflation rate is expected to recover within the variation intervak of the target in the middle of the next year and to be positioned, at the end of the projection horizon in the superior half of this variation interval,” the BNR Governor explained.
According to him this trajectory reflects both the exhaustion of transitory effects of reducing the VAT standard share and the dissipation of the influences of global disinflation shocks, as well as inflation pressures exercised by the gradual opening of the aggregate demand surplus and the unitary wage costs.
In regards to the risks of inflation, the Governor mentioned, on the domestic plan, the budget configuration for 2017, and on the external plan he stated that the risks are mainly generated by persistent uncertainties regarding the global economic growth and by economic recovery of the Euro area, in the context of extending the emergent major economy revival, the problems in the European budgetary system and the result of the UK referendum.
The annual inflation rate dropped to minus 0.6 percent in September 2016 compared to the similar month of the last year, from minus 0.2 percent in August, according to the data published on 11 October by the National Institute of Statistics (INS).
The BNR estimates an inflation of minus 0.4 percent for the end of this year.
BNR decides to keep monetary policy rate at 1.75 percent per annum
At a meeting on Friday, the Board of the National Bank of Romania (BNR) decided to keep unchanged the monetary policy rate at 1.75 percent per annum and to maintain the existing levels of minimum reserve requirement ratios on both leu- and foreign currency-denominated liabilities of credit institutions.
Also decided was the pursuance of adequate liquidity management in the banking system, reads a BNR press statement released on Friday.
The monetary policy rate has been kept unchanged since May 2015.
The BNR Board has also analysed and approved the new quarterly Inflation Report which will be released to the public on November 10, 2016.