Former PM Citu argues Romania's central bank should bring policy rate in line with core inflation

Former finance minister and prime minister Florin Citu argues that the National Bank of Romania (BNR) should bring the refinancing rate (gradually) towards the core inflation, which was over 11% y/y in August, if the updated inflation outlook deteriorates compared to past expectations.

Such a deterioration was already hinted at by central bank officials last month and is more than a scenario.

Fighting inflation despite Government's preference for more affordable financing costs is a test for the central bank's independence, Citu stressed, according to News.ro, adding that BNR is waiting in vain to see the Executive contributing to price stability through tighter fiscal discipline.

While BNR, and the Government's experts, may argue that the inflation is now of an exogenous nature – it is equally true that the expected inflation remains a major, if not the largest, contributor to overall inflation.

A wave of wage hikes and upward price corrections is highly likely over the coming couple of months, largely driven not only by the energy and food prices but also by the general expectations for the prolonged inflationary cycle.

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