It is not a good time to talk about rate cuts, Romanian central bank (BNR) governor Mugur Isarescu said while unveiling the updated Inflation Report on November 10. The worst scenario is seeing inflation picking up just after a rate cut, he said.

Rate cuts will not take before inflation falls sufficiently low, he announced, stressing that the policy rate is still negative in real terms and the central bank is striving to encourage growth by allowing sufficient liquidity in the market, Ziarul Financiar reported.

The concerns expressed by governor Isarescu, in slight contrast to the more moderate Inflation Report that confirms the smooth disinflation scenario, are quite natural amid the visible lack of fiscal discipline and predictability demonstrated recently: the two ruling parties reportedly agreed over a significant rise in public spending in the electoral year 2024 and are close to putting at risk the fragile expectations for fiscal consolidation by promising 40% higher pensions next September. 

“Czechia, Poland, Hungary, countries with which we compare ourselves with and which also have exchange rate floating policies, none of them have the fiscal-budgetary problem that Romania encounters,” governor Isarescu said.

iulian@romania-insider.com

(Photo source: Inquam Photos/Octav Ganea)