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The members of the Board of Directors of the National Bank of Romania (NBR) (NB) noted in the recent meeting that the main determinant of economic growth has returned to private consumption and a negative influence is given by the lack of the budget 2019 and from fiscal and budgetary measures in January, writes Mediafax.
"Analyzing the perspectives for the influence of fundamental factors, the members of the Council have concluded that, according to new data and assessments, economic growth will probably remain robust in the short term, with a dynamic volatility year on year in the fourth quarter of 2018 and a slight acceleration in the first quarter of 2019. Economic growth is expected to fall sharply in the fourth quarter of 2018, only as a result of the contraction that agricultural production is likely to experience following the exceptionally high rise in the previous quarter and The increase in the first quarter of the current year has been considered that these developments may increase the positive GDP gap in the two quarters, only marginally lower than the medium-term forecasts.At the same time, the members of the Board have noted that, according to the latest developments in high frequency indicators, private consumption is likely and returned to the main determinant of economic growth in the fourth quarter of 2018, while gross fixed investment may be an increase in the negative contribution to GDP growth. 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 its annual growth moderately, including an improvement in the balances of primary and secondary incomes, "states the minutes of the monetary policy meeting of January 8, 2019.
With regard to future inflation developments, Council members 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 of the target maximum target limit of 3.5%, in line with the medium-term forecasts published in the November 2018 inflation report, which predicts its downward trend to 2.9% in December 2019 .
"It was noted that the decline will continue to be driven by supply-side factors, given the relatively more pronounced inflationary inflation expectations expected to come from volatile prices – LFOs and fuels, but they will probably be offset from January 2019 from the effects of the increase in excise duties on cigarettes, and it is probable that on this fund the aggregate disinflationary contribution of the exogenous components of the IPC will be exhausted in the near future ", quotations of the minutes cited.
According to some members of the National Bank of Romania, the action of supply factors could even return to inflation in the near future, assuming the rise in prices of foodstuffs or prices of services and utility beyond expectations, even as a result of fiscal and budgetary measures that came into force at the beginning of this year, the context remains relevant in terms of implications for medium-term inflation expectations.
"Council members appreciated the fact that, in the analyzed context, which includes imponderables from the external environment, the uncertainties and risks for the most recent forecast (inflation – inflation) in the medium term increase substantially. 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 has been observed that an assessment is necessary as much as possible of the implications of these measures for the short and medium term perspective Some members of the Council have emphasized that they can exercise significant effects in the short and medium term on the economic activity, but also on the growth potential of the economy, both through the fiscal impulse and the structure of budget expenditure, and by affecting investment and consumption, " members of the National Bank of Romania.
During the recent monetary policy session, members of the NBR have paid attention to the tax on financial assets of lenders, discussing the characteristics and possible implications for monetary policy and lending, as well as financial stability and macro – stability in general.
"Among other things, Council members considered that, according to ROBOR's quotes, this tax influences the efficiency and flexibility of monetary policy, implicitly the ability of the central bank to keep inflation under control , which proved to be essential for the performance of the annual inflation rate in the target range in 2018. At the same time, it was shown that the negative effects of the tax could be amplified by those of the recently approved banking initiatives whose provisions could affect the lending and currency transmission, but the stability of the banks, as well as the external costs of financing the economy Some members of the Council suggested the meeting of the National Macro-prudential Supervisory Committee to examine the effects of the new measures on the system banking and making recommendations to public authorities ", highlighted the members of the l Council.
They also noted that the growing uncertainties come from the external environment, in the context of the slowdown in euro growth and the global economy, and the greater risks inherent in their prospects for trade conflict and the process of exit of the United Kingdom in the EU, as well as 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 European Central Bank (ECB) and other large central banks and the probable attitude of central banks in the region.
"In this context, the members of the Council have again underlined the need for a balanced mix of macroeconomic policies, avoiding the overwhelming monetary policy with undesirable effects in the economy, while at the same time the importance of appropriate dosing and adjustment rate of monetary policy behavior, from the point of view of anchoring inflation expectations and maintaining the annual rate of inflation on the trajectory highlighted by the latest mid-term forecasts of the NBR, financial stability " , show the minutes of the monetary policy meeting of January 8, 2019.
Under these circumstances, the NBR CA decided unanimously to maintain the monetary policy rate at 2.5%, the interest rate on the deposit line at 1.5% and the interest rate on the 39, a 3 5% Lombard plant, in addition to maintaining the current levels of minimum reserves for leu and the foreign currency liabilities of credit institutions at 8%.
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The members of the National Bank of Romania, who also participated in the meeting, are: Mugur Isărescu, president of the CA and governor of NBR; Florin Georgescu, Vice-President of the CA and First Deputy Governor of the National Bank of Romania; Eugen Nicolăescu, member of CA and vice-governor of BNR; Liviu Voinea, a member of CA and vice-governor of BNR; Marin Dinu, a member of CA; Daniel Daianu, member of the CA; Gheorghe Gherghina, a member of CA; Ágnes Nagy, member of CA; Virgiliu-Jorj Stoenescu, member of the CA.
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