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No Economic Grounds For Planned Price Hikes – Central Bank Official

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26 Ian 2008 - 00:00

The reasons for triggering inflation in Romania are in the monetary policy, structural, but most of them are psychological, said Adrian Vasilescu, adviser to the National Bank Governor, in an interview with Jurnalul National.



The reasons for triggering inflation in Romania are in the monetary policy, structural, but most of them are psychological, said Adrian Vasilescu, adviser to the National Bank Governor, in an interview with Jurnalul National.

 

He added that the 15% price hike forecast by retailers to take place in February has no economic grounds in the national currency devaluation.

 

In spite of all the alarming calls, Romania's central bank keeps its inflation target for this year at 3.8%, plus-minus 1%.

 

The national currency was traded Friday at almost the same levels as the day before, that is 3.7694 for the euro. A new maximum value of 3.83 lei for one euro was reached in the inter-banking trade, after foreign funds placed aggressive buy orders, dealers said.

 

“Midday Friday there was a sudden surge in the number of buy orders placed by foreign funds, which determined a 0.05 lei hike of the exchange rate, in less than an hour,” a dealer said.

“Only a central bank intervention on the market could stop the decline of the leu,” he added.

 

Vasilescu said that the central bank continued to place its bets on the national currency. “But that does not mean that we advise people how to trade; after all, Romanians do not live out of exchange rate speculation,” he said.

Vasilescu pointed out that “revenues in Romania grow faster than the inflation, which goes to say that the leu starts to stand for something, doesn't it.”

 

The National Association of Exporters and Importers recently asked the central bank to keep the exchange rate to the euro at between 3.6 and 3.8. “But the association well knows that the national bank is no tally to keep the currencies in balance, and that the prices of currencies one against the other are traded on the free market, as the price of cooking oil is,” said Vasilescu, speaking at a meeting of industrialists in Romania, UGIR-1903.

 

Referring to the price hikes forecast for this year, Vasilescu said that a genuine psychosis on the topic is  beeing fed in Romania by the business owners, who every month warng about future price hikes.

He added that the 2007 inflation shooting over the target set by the National Bank was triggered not only by the crisis of the US real estate market, which sent ripple effects in the international economy, but also by “incessant talk about inflation” which takes place domestically.

 

“The inflation prone climate is fed by a psychosis fed with cries from the business community, which uses all radio and television channels to warn every month about 30% to 50% price hikes,” Vasilescu said. In spite of these cries, the central bank  representatives do not believe the February deadline for new price hikes would be met. “There will be no price hike in February, as the consumers have a powerful weapon to deploy with simply walking out of stores,” Vasilescu added.

 

The fall of the leu against the euro does  not provide economic grounds for the 15% price hikes forecast for February as retailers still have merchandise bought at old prices and at former favorable exchange rates, Vasilescu also said.

 

Translated by Anca Păduraru 

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