The stock of bank loans is rising slower than the nominal GDP meaning that the financial intermediation expressed as the loans-to-GDP ratio is weakening, therefore the central bank must pay attention to how much it tightens the monetary policy in order not to discourage lending, Romania’s National Bank (BNR) governor Mugur Isarescu said as he presented the Quarterly Report on Inflation last week.

This was one of the reasons behind the central bank’s decision not to hike the monetary policy rate that remains below inflation.

Isarescu argued that the lending is not contributing to the excess demand, which the central bank has constantly associated over the past years with the Government’s policies.

"We can hardly say that the excess demand is generated by lending. Nominally, the lending [the stock of loans] is rising slower than the GDP and this means disintermediation. We need to be careful about strengthening monetary policy because it can discourage lending. For this reason, I did not consider it appropriate to increase the monetary policy interest rate,” Isarescu explained, quoted by Ziarul Financiar.

The yearly growth rate in the credit to the private sector slowed in September, to 7.7% year-on-year, from 8% in August.

(Photo: bnr.ro)

editor@romania-insider.com