NBR Foresees the Inflation Decrease

The last four months of this year will bring an important inflation decrease, which allow the National Bank of Romania (NBR) to continue its action of cutting down the intervention interest rate.

Cristian Popa, the NBR vice-governor, stated that in the last part of this year there wouldn’t be any significant adjustments for the administrated prices. The inflation rate will be at low levels being supported by prudent monetary and fiscal strategies, said Popa during the "Young Economists" seminary. For the first eight months, cumulative, the inflation rate has reached 5.6%, and, in comparison with 2003, the price parameter shows an increase with 12.4%. Popa believes it is possible to reach the inflation objective, 9%, at the end of this year. The official also reminded the high level of the central bank international reserve.

LIBERALIZATION. The NBR vice-governor thinks it is highly possible that, starting from April 2005, the capital account will liberalize totally. Popa says that there are more facts to support his belief, some other than the commitment with the European Commission (EC), meaning solid grounds for reaching such a state that allows the mitigation of the risk of speculative capital. In his opinion, an interest differential of more than 4% wouldn’t be a problem, this also being the strategy chosen by Poland. In the same time, a difference higher than 10% between the interests in lei and the rates with which euro and the U.S. dollar are paid wouldn’t mean safety for the central bank.

Popa reiterated the position of the NBR governor, Mugur Isarescu, according to which the short term foreseeing of the currency rate for the national currency will be much more reduced, being a risk instrument for the speculative funds. "The daily variations will be potentially more ample, which will mean one more risk for the speculative funds", explained Popa. About the middle term evolution, the national bank representative expects maintenance of the present trend of assessment of the national currency, which is supported by the major capital admittance. Popa believes that in the last months of the year the national currency will show a strengthening tendency in comparison with the main currencies as well.