“We are just coming out of the recession, and yet we still have inflationary expectations. I don’t think that a more relaxed monetary policy would fix things,” Isarescu said.
He said inflationary pressures mainly come from supply shocks.
“Monetary policy can control the demand, but preventing higher prices derived from supply shocks triggers wider fluctuations in production and unemployment rates,” Isarescu added.
The central bank’s chief said Romania’s effort to reduce its budget deficit to 3% of the gross domestic product from 9% of GDP pre-crisis has took its toll on the economy and the monetary policies implemented during the recession were not enough to balance the fiscal policies.
“I suspect the fiscal policy is still rather procyclical,” Isarescu said.
However, there were not too many options regarding the fiscal policies, as they were already procyclical when the recession started in late 2008.