The National Bank''s Board of Governors is today discussing the increase in the monetary policy rate which was also recommended by the IMF as the main instrument in fighting inflation, along with other steps to be used in a new bid to cool down consumer demand.
Emmanuel van der Mensbrugghe, the IMF''s negotiator for Romania said yesterday, after two weeks of evaluations, "energetic efforts are needed to curb inflation."
The IMF places inflation at the top of the list of macroeconomic problems Romania is facing, demanding once again that the monetary, wage, and fiscal policies be made stricter at the same time.
"The NBR has taken the first step in the right direction by increasing the intervention rate towards the end of last year, and is now about to proceed along the same path to curb inflation," stated Emmanuel van der Mensbrugghe. The monetary policy interest rate has been stagnating at 7.5% per year since September 2005, but did not function as the NBR''s intervention rate up until November, with the effective rates for operations being slashed down. As of November, however, the two rates were once again coupled together, upon the IMF''s recommendation, with the NBR eventually purging at the maximum 7.5% rate.
The NBR Governor, Mugur Isarescu, says a number of steps to tackle consumer demand will be discussed today.
"I will vote for a set of measures because we are still not in that desired position which would allow us to control demand by (the push of) a single button. We will probably get there in one year or two," Mugur Isarescu told ZIARUL FINANCIAR.
The measures include a more transparent schedule of the central bank''s operations on the monetary market, as well as reaffirming the decision made in December with regard to boosting the volume of liquidity purged. Therefore the auctions held to attract cash towards one-month deposits are to be organised every Monday, while auctions for three-month bills will be held on the second Wednesday or Thursday of every month. Isarescu specified this would not necessarily mean enforcing the monetary policy rate or the complete purging of the liquidity on the market, either.
"We do not intervene just whenever there is excess liquidity, because this also stems from the banks'' behaviour. We seek to purge as much as we can, but we are no longer managing the liquidity of every single bank. It''s time they traded between them on the monetary market and not only with the NBR, and take chances like they do on the forex market," the NBR Governor says.
He stated that the intervention rate would be able to fluctuate, and may go above 8.5% or go down, it may overlap with the market interest rate, or it may not. "If the monetary market is functional, we will have interest fluctuations, as well, though not of the kind seen in September last year when we had to break a certain behaviour of the banks," Isarescu stated.
The market players have been awaiting a decision for an increase of the monetary policy rate since yesterday, which should trigger increases in the intervention rate, as well.
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