Suciu: BNR tries to reduce inflation expectations by increasing monetary policy interest rate

The Romanian Central Bank (BNR) tries to reduce inflation expectations by increasing the monetary policy interest rates and slow down price increases for other components, in conditions in which over 70% of the inflation component is determined by energy prices, said Dan Suciu, the BNR spokesman at Radio Romania News, according to Rador.   He said that an increase of generalized interest rate takes place at world level and he does not think there are many central banks which afford to increase the interest rate. Asked whether previous projections were too optimistic he answered that the deep impact and the spectacular increase rate of energy prices had not been anticipated. He said that in that situation there are two types of solutions, a combination of fiscal policies and of monetary policies.   He pointed out that it is a unique situation, since inflation causes in Romania, at least in the early 1990s, were domestic, concerning production capacities, and answering demand, therefore an inflation determined by high market demand.   “Now inflation comes from offer, because we have prices that explode beyond the existing demand, that is we do not have an additional demand for those products, but we have offers that come with additional prices for reasons beyond our domestic control. We have references of these energy prices which are international and in the context in which we had a price liberalization we choose a very high price component for energy in the inflation index. I repeat, over 70% of the inflation index comes from energy,”Dan Suciu said.   Asked how the National Bank can step in to keep the situation under control, he showed that the BNR intervention is indirect.   “Obviously we cannot change energy prices, but we can limit the pressure that leads to the other prices by limiting credit, by making money more expensive. We do it step by step. For the time being, we make money more expensive, step by step. For the time being, we had three steps of making money more expensive, so that the quantity of money that can wonder in an economy and can determine other prices to go up and be better appointed for,” the BNR representative said.