Romanian Social Democrat minister of finance Adrian Câciu warned of a new wave of inflation this year - this time driven by the monetary measures pursued by central banks - and complained about the challenges posed to fiscal policy by the lack of price stability.

“Another wave of inflation, ‘monetarist inflation’, triggered by the capital explosion that took place in the US and Europe, will reach us. Money was printed. As the central banks are hiking the monetary policy rates, they will create ‘interest rate’ or ‘monetarist’ inflation,” he explained, according to B1tv.ro.

This new wave will overlap with the inflation caused by the energy prices and by the external deficit, with the bulk of inflation in Romania expected in the middle of 2022, “unless we do something,” minister Câciu argued.

However, he hasn’t mentioned the inflationary effects of the steady and wide public deficits. Romania’s budget deficit neared 10% of GDP in 2020, narrowed just under 7% of GDP last year and will probably remain above 6% of GDP this year, not far from the official 5.84% target.

The National Bank of Romania (BNR) has constantly mentioned fiscal policy among the main threats to price stability, and it has deferred until the very last minute pursuing more hawkish policies with a view of stimulating growth.

Minister Câciu claimed that the Government “will use the fiscal policy against inflation” in good collaboration with the National Bank. 

andrei@romania-insider.com

(Photo source: Gov.ro)