IMF recommends Romania to keep monetary policy restrictive
Romania should maintain restrictive monetary policy given that the core inflation in the country has increased, partly due to pressures from domestic demand, the International Monetary Fund (IMF) said in a regional economic report on Europe, published on Wednesday, November 6.
In principle, tighter monetary policies impact interest rates across the whole economy and depress economic growth, as a cost to be paid for previous pro-cyclical fiscal stimulus.
"In Romania and Turkey, monetary policy must remain restrictive to keep inflationary pressures under control and strengthen the credibility of monetary policy," says the IMF.
According to the "World Economic Outlook", published in October, the IMF has revised its estimates of the evolution of consumer prices in Romania in 2019, up to an average annual growth of 4.2%, compared to an advance of 3.3 % expected in spring, while in 2020 prices would increase by 3.3%, compared to a 3% increase as estimated in spring.
The annual adjusted CORE2 inflation rate (which excludes administered prices, volatile prices, and tobacco and alcoholic beverage prices from the CPI inflation) continued to increase in Q3, albeit at a slower-than-anticipated pace, going up from 3.3% in June to 3.4% in September, Romania’s National Bank (BNR) said in its latest monetary policy decision on Wednesday, November 6. BNR decided to keep the monetary policy indicators unchanged.