“While the monetary policy became tighter, speculative capital inflows grew and the leu was getting stronger. Does the simple theory (to tighten monetary policy) work? Did it lead to something good? No, the outcome was rather bad,” central bank governor Mugur Isarescu said at a seminar on monetary policy.
Isarescu said the monetary policy tightening resulted in overvaluation of the leu and it inflated the “bubble” of foreign currency lending.