The Governor said that the central bank finds sending monetary policy messages difficult in the current climate, and that lowering the eight percent benchmark rate at its last Board meeting would also have been difficult. The official warned that the gap between interbank rates and the key rate is “very likely” to remain wide.
Isarescu said that the central bank is “concerned” about the postponement of the International Monetary Fund (IMF) loan tranche, but BNR is prepared to respond to this situation. The market will consider this postponement a negative sign, and the main problem will be financing the budget deficit in the fourth quarter. Isarescu added that he does not remember a year when budget expenses met their targets in the final two months.
The Governor said that the current account deficit, which was at an unsustainable level of over 12 percent of gross domestic product (GDP) last year, narrowed to about four percent this year.
Isarescu said he remains optimist about the rebound of the economy, given the “slightly positive” trend in terms of industrial production, which will be reflected in the evolution of GDP, with a two-three month delay. BNR’s Governor added that he hopes the avalanche of anti-crisis projects and programs will end after the presidential elections. “I hope these discussions will end. I have never heard debates with the financial plan being so far from reality,” Isarescu said. He warned that Romania does not presently have an alternative to its foreign financing program with the IMF and the European Commission.
BNR revised upward its inflation forecast for the end of 2009, to 4.5 percent from 4.3 percent, due to the increasing influence of tobacco excise taxes and administered prices, Isarescu added. The latest statistics indicate that the annual inflation rate fell to 4.94 percent in September from 4.96 percent in August, according to the National Institute of Statistics (INS).
