The central bank should join in with the government’s efforts to resume growth, and even accept a higher inflation than the planned targets, adds Danila, who is a member of the central bank’s board.
Although Danila, a former CEO of Romania’s largest bank BCR, spoke in his capacity as professor, this was the first time that a high ranking official of the central bank questions the past years’ monetary policy, when the country was mired in an economic crisis, i.e. targeting the targeting in spite of promoting measures to fuel economic growth.
Only towards the end of 2011 the central bank started to reduce the interest rates, but the policy easing cycle stopped in March 2012 amid a political crisis.
Danila, who operated for years in the real economy, believes it is time to move to “proactive and correlated” economic and monetary policies, i.e. to a mix of well correlated policies between the government and the central bank, aimed at increasing Romania’s economic and financial strength.
“Keeping the emphasis almost exclusively on the monetary policy of targeting inflation and awaiting miracles without balancing its approach by also taking measures that generate economic growth, macroeconomic and financial stability and sustainability, can lead us to a risky situation that could offset a big part of the positive effects accumulated in connection to the monetary policy decisions taken so far, affecting the credibility and independence of the central bank and jeopardizing the restructuring and reform programs,” Nicolae Danila says.
He talks about the need for the central bank to take an “active role” and argues in favor of “a clear policy to reduce the public and private financing costs by continuing an adequate trend of the monetary policy interest rate level.”
Unlike counterparts in other central banks in the region, members of the central bank’s Board of Governors are reluctant to voice their opinions on the monetary policy publicly, with the Governor Mugur Isarescu being the only exponent of the bank’s policies.
(English version by Daniela Stoican)