Speaking at a news briefing after a central bank monetary policy meeting, Isarescu dismissed as “oversimplified” market voices that call for a more relaxed monetary policy of the central bank in order to stimulate investments and boost growth.
“It is an oversimplification to say that if you cut interest rates then you stimulate investments and you get economic growth immediately, as new investments are not dependent entirely on interest rates,” Isarescu said.
He said Romania’s current account deficit is still very wide, of 4% of the gross domestic product, which means that domestic resources are scarce and must be attracted from foreign parties.
“So if we were to lower our interest rate, then we could in fact hinder domestic savings, which are already insufficient, as well as foreign inflows, and the result would be completely adverse [to economic growth],” Isarescu added.
The central bank left its key rate unchanged at a historic low of 5.25% for a seventh straight time Tuesday, in line with expectations. The minimum reserve requirements were also kept stable at 15% for Romanian leu-denominated liabilities and at 20% for foreign currency liabilities.
Today’s decisions were aimed to “ensure the resumption and the subsequent consolidation of disinflation, thus creating the necessary prerequisites for a gradual recovery of the Romanian private lending and sustainable economic growth,” the central bank said.