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The tax on financial assets of credit institutions, according to ROBOR prices, influences the efficiency and flexibility of monetary policy, implicitly the ability of the central bank to keep inflation under control, shows the minutes of the meeting of Monetary policy of the Board of Directors of the National Bank of Romania, published on the institution's website, informs Agerpres.
"Attention has been paid to the tax assets of credit institutions, with characteristics and possible implications for monetary policy and lending, as well as financial stability and macro-stability in general. Council members felt that, according to ROBOR's quotes, this tax affects the efficiency and flexibility of monetary policy, implicitly the ability of the central bank to keep inflation under control, which has revealed essential to bring the annual inflation rate within the target range in 2018. At the same time the negative effects of the tax have been shown to be enhanced by those of the recently approved banking legislation, whose provisions could affect the loan and transmission currency, but also on the stability of banks and external financing costs of the economy The members of the Council suggested the meeting of the National Macro-prudential Supervisory Committee to examine the effects of the new measures relating to the banking system and to make recommendations to public authorities ", notes the BNR.
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The members of the Council appreciated the fact that, in this context, which includes imponderable statements, uncertainties and risks for the most recent medium-term prospects, they are substantially increasing. An important source is the conduct of fiscal and income policy, including the failure to complete the draft budget for 2019 and the content of fiscal and budgetary measures that came into force on 1 January 2019.
It was noted that a full assessment of the implications of these measures in the short and medium term is required. Some members of the Council have emphasized that they can exert significant short and medium-term effects on economic activity, but also on the growth potential of the economy, both through the fiscal impulse and the structure of budgetary expenditure. , both affecting investment and consumption.
Regarding future developments, Council members have agreed, based on the latest information and analysis, that the annual inflation rate will likely continue to decline and will therefore remain on the very short horizon slightly below the upper limit of # 39; target range, in line with the medium-term forecasts published in the November 2018 inflation report, which expects its downward trend to 2.9% in December 2019.
According to the document, it is noted that the decline will continue to be driven by supply-side factors, given the relatively more pronounced disinflation effects expected to arise from volatile prices – LFOs and fuels. However, they will probably be offset by the effects of the excise tax on cigarettes starting in January 2019, as the aggregate disinflationary contribution of the exogenous components of the IPC is likely to be exhausted in the near future.
According to some members of the Council, the action of supply factors could even return to inflation in the near future, in the case of expectations exceeding expectations on food prices or prices of services and utilities , also as a result of fiscal and budgetary measures at the beginning of this year, the context remains relevant in terms of implications for medium-term inflation expectations.
Analyzing the perspectives of influence of the fundamental factors, the members of the Council have concluded that, according to new data and evaluations, economic growth will probably remain robust in the short term, with an almost stable dynamics in the fourth quarter of 2018 and a slight acceleration in the first quarter of the year. 2019. In quarterly terms, economic growth is expected to decline sharply in the fourth quarter of 2018, solely as a result of the contraction that is likely to be affected by agricultural production after the exceptional increase in the previous quarter and the increase in the first quarter. quarter of this year. It was considered that these developments could increase the positive GDP gap in the two quarters, only marginally lower than medium-term forecasts.
At the same time, Council members noted that, according to the latest developments in high frequency indicators, private consumption has probably returned to the main determinant of economic growth in the fourth quarter of 2018, while gross fixed capital formation may be increase in the negative contribution to GDP dynamics. In the case of net exports, however, the negative contribution is more likely to decrease, given the relative slowdown in the month of October of the annual growth rate of the trade deficit, also in the context of an increase in the negative difference between the annual growth of exports and that of imports of goods and services; in turn, the current account deficit moderated slightly the annual growth, including an improvement in the balances of primary and secondary income.
According to the minutes, the growing uncertainties come from the external environment, in the context of the slowdown in the growth of the euro and the global economy, and the greater risks inherent in their vision of the trade conflict and the exit process. of the United Kingdom from the EU, how and the tendency to tighten the financial conditions and the volatility of the international financial market. Reference was also made to the behavior of the monetary policy of the ECB and other large central banks and to the likely attitude of central banks in the region.
In this context, the members of the Council again underlined the need for a balanced mix of macroeconomic policies that avoid overwhelming monetary policy with undesirable effects in the economy. At the same time, it was reiterated the importance of an appropriate adjustment and adjustment rate of monetary policy behavior, from the standpoint of anchoring inflation expectations and maintaining the annual rate of inflation on the trajectory highlighted by the latest medium-term forecasts of the NBR, financial stability.
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