Isarescu: Five contagion channels of financial crisis in Romania

After successive years of pay rise above the productivity growth, now “you can’t even say a single word about earning growth and there goes the pressure exerted on the currency exchange rates”, said the BNR governor, adding that the balance level is determined by its dynamics.

The head of the central bank stressed that the Romanian banking system was not exposed to “toxic assets” and could make up an anchor to curtail the effects of the global financial crisis.

“We had time to review the balance sheets of the banks. Now, after a third round of evaluation, we can assure that banks in Romania are not exposed to toxic debts”, Isarescu said.

BNR expects to reach the inflation target in 2009, the regulator setting the inflation target for 2010 at 3.5%, with -/+1% tolerance band, said BNR governor.

“As it is an election year, we haven’t discussed the target with the government, and we expect the approval of the budget plan by the parliament”, said Isarescu.

The inflation target for 2010 is identical with the target for 2009 and slightly below the last year’s objective, of 3.8% and -/+1% tolerance band.

The governor added that inflation-targeting strategy is suitable for Romania, as it “confers enough stability in times of international crisis and tensions”.

BNR adopted inflation targeting in 2005 and achieved the objective in only one year, in 2006 when the annual inflation rate of 4.87% was below the forecasted rate of 5%, -/+ 1% tolerance band.

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