The National Bank has no room to cut the key interest rate onRON-denominated loans, and prospects are not very encouraging,either, Governor Mugur Isărescu suggested at the presentation ofthe Report on third-quarter inflation. The NBR last cut the keyinterest rate this summer, to a 6.25%-a-year an all-time low afterthe Government raised the VAT from 19% to 24%, although the economyhas yet to rebound after two years of recession.
Isărescu yesterday talked about a "significant" demand deficit,which will extend beyond the summer of 2012, according to the NBR'scurrent projection, thus helping the NBR fight inflation. However,the governor said economic growth would be resumed in a "healthymanner", by means of a public sector adjustment, which has startedbeing operated via redundancies and salary cuts. He also renewedcriticism of those demanding action from the central bank, i.e. arelaxation of the monetary policy in order to help theeconomy.
"Adjustments continue on the labour market. They are not limited tothe private sector, they are also present in the government sector,with a certain delay, but they do exist. This will help resumeeconomic growth on a sustainable base," Isărescu said.
The governor names the press as one of the factors keepinginflation high despite the decline in the population's purchasingpower, because expectations of price increases are fuelled by newsstories, with consumer confidence also being affected.
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