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September 30, 2022

BNR’s Isarescu: National currency may depreciate in next period; analysts expected key interest rate rise. v

The national currency may depreciate in the next period, after the analysts expected a key interest rate rise, and when they are disappointed they can react, the Governor of the National Bank of Romania (BNR) Mugur Isarescu  said on Wednesday.

He said that a 4% current account deficit in GDP is not a “magic figure,” but it is a figure in the dashboard and it is not good to go beyond it, because it means you are very dependent on foreign investors, the capitals that come in and which “as they come in they can also come out”.

The BNR governor mentioned that not only BNR answer the question about the impact of the central bank’s decision to keep the key interest rate on the exchange rate because it is also about the way the internal and external markets perceive Wednesday’s decision.

“We have a message to the markets. There is a rather consistent interest rate differential in favor of the leu, I think it is covering, we’ll see what the markets are saying,” the head of the central bank said.

He argues that after the last monetary policy decision, one felt a slight appreciation tendency of the leu.

At the same time, Isarescu said that the key interest increases have not yet consumed their effect, and that we can expect increases in interest rates in terms of deposits.

The BNR Board of Directors decided on Wednesday to keep the monetary policy interest rate at the level of 2.25% per annum.


“I answered to Dragnea’s letter, he will make it public”


The Governor of the National Bank, Mugur Isarescu, stated on Wednesday that he answered to the letter previously received from the Speaker of the Deputies’ Chamber Liviu Dragnea, mentioning that he doesn’t want to give details from this answer, since Dragnea announced that he will make the letter public.

“We – the Board of Directors – BNR – are acting based on a mandate. Politicians also have a mandate, the people’s one, they are also right. We had a verbal dialogue, too, with the parties in the Opposition, and the Speaker of the Deputies’ Chamber preferred to write. I answered him also in writing. He said that he will make the answer public, so I’m not going to give you details from the letter. Don’t push things too hard, we are in the Holy Week” Mugur Isarescu said, answering to some insistent questions of the journalists at the press briefing after the monetary policy session of the BNR management.

Among the risk factors related to inflation, the central bank identified “the fiscal policies, the labor market, and the evolution of the administered prices”.

“This is our invitation that you can find in any BNR release – a mix of economic policies. Not any monetary policy measure can counterbalance things, if fiscal relaxation takes place. This mix of policies isn’t easy to find” Mugur Isarescu added.

The BNR Board of Directors decided at the session of April 4 to maintain the monetary policy interest rate to 2.25% per year, contrary to the expectations of the analysts, who were expecting an increase up to 2.5%.

The BNR Board of Directors decided to maintain the deposit facility interest rate to 1.25% per year, and the lending facility interest rate to 3.25% per year, and to maintain the current levels of the rates of the minimum mandatory reserves applicable to the liabilities in RON and in foreign currency of the credit institutions.


BNR makes decisions on a mandate, politics is influencing the climate, yet does not determine us


The National Bank of Romania (BNR) makes decisions based on a mandate and having its eyes watching very carefully the data, the figures and facts, the central bank’s governor Mugur Isarescu said on Wednesday, mentioning that the politics “is influencing our climate too, but does not determine us”.

“We do not live outside this country, we are paying attention to discussions. Why’s that? Because a certain climate is distorting our decisions. Hence, we look at it. We are careful to many aspects, yet we don’t make decisions under pressure. You see, we are in a huge building here, with thick walls,” Mugur Isarescu said when quizzed if the decision to keep the monetary policy rate unchanged was made under political pressure.


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