Central bank’s governor: Inflation, very tricky disease, can occur under ‘n’ shapes

Inflation is an extremely tricky disease that can occur under ‘n’ shapes, on Monday asserted the National Bank of Romania (BNR)’s governor Mugur Isarescu at the “Inflation in past ten years” conference, adding that the inflationary pressure as well as our deficits are largely structural.

“If I were to define now, in front of you, whether the inflation is fiscal, monetary, structural, well, as far as we are concerned and we won’t give in to our illusion that we entirely control it, it is an extremely tricky disease that can occur under ‘n’ shapes. And currently, the inflationary pressure and our deficits are structural to a great extent at micro level as well,” Isarescu said.

The drop in the crude oil price will be seen in the inflation rate in the next period, the central bank’s governor added. He assessed that within a week it is possible that a 3.5pct inflation be announced.

The BNR governor has also referred to the budget drafting for 2019 and said that from his prime minister experience this process is “a fussy arithmetic”.

“Our budget construction is a fussy arithmetic. I have known it ever since 2000 when I used to be Prime minister. We had back then 32pct of the GDP [budget revenues, ed. n.] and they used to come to me, systematically, the Finance minister, with demands of budget spending varying between 40pct and 50pct of the GDP. And that was all about negotiation. Where was I supposed to cut so as to have 32pct instead of 40pct in deficit. Is this a macroeconomic balance philosophy? And they used to resort to various kinds of tricks so that each could obtain a large chunk of the spending,” Mugur Isarescu underlined.

BNR maintained the inflation prognosis for this year’s end at 3.5pct and raised at 2.9pct, from 2.7pct the prognosis for the next year, on Thursday announced the BNR head, when presenting the Quarterly Report on Inflation.


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