Isarescu: NBR could move to tightening monetary policy because of inconsistency of policies

The VAT hike significantly affected the monetary policy trend and interrupted the central bank's cycle of cutting the monetary policy interest rate, with there even being the risk of a reversal in the trend pursued for around one year, says NBR governor Mugur Isarescu.

"This country has been forced to raise VAT from 19 to 24%, by five percent. This caused a major shock. It disrupted the economic cycle. It upset our entire cycle of cutting interest rates here at the NBR and this is no trifle, to have a certain degree of predictability, to pursue a monetary policy target, and to be brutally disrupted and run the risk of having to reverse the trend because of the inflation hike that follows such a measure," said Isarescu at the "Romania, where is it headed? How do we bring confidence back?," seminar organised at the NBR yesterday.

The governor brought up the lack of consistency as far as policies and messages from the Government and politicians are concerned, exemplifying with the public rhetoric that currently cites the significant VAT cut as a solution out of the crisis, three months after the decision to hike the tax. "We are totally inconsistent as far as policies and messages are concerned," he says.