The inflation target set by the NBR (National Bank of Romania) should be supported by a similar commitment from the Ministry of Finance regarding the budget deficit, according to Mugur Isarescu (photo), the Governor of the Romanian central bank. In line with the strategy adopted in mid 2005, the NBR sets annual inflation targets and uses the instruments at its disposal to attain them, which often puts its credibility on the line. In addition, the budgetary deficit set by law does not function as a proper target, after the Ministry of Finance's budget was marked by uncertainties during the course of the year. "The adoption of a monetary policy rule should be accompanied by a fiscal rule. (...) It is essential that the leading directions of economic programmes should be scrupulously followed beyond the limited horizon of a term in office. The process of euro adoption imposes realistic, but also visionary management, which should take into account the fact that the Romanian economy requires a period of adjustment before Romania's entry into the ERM II system (the mechanism that tests the stability of the exchange rate)," said Isarescu in his speech "Monetary Policy Issues in an Emerging Country", held recently at the Royal Academy of Economic and Financial Sciences in Barcelona.
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