“The markets are increasingly believing that Romania is now a country with a low inflation, but we are not sure that this trajectory will not end in the second half of the year, or that it will continue into 2015 as well,” Isarescu told a news briefing.
He said the central bank is basing its monetary policy decisions on the average annual inflation rate rather than the annual rate, whose evolution is highly influenced by volatile prices.
“We don’t have the certainty that the inflation is on an irreversible downward trajectory. We need more elements before we can say that we have a consolidated trajectory based on which we can make monetary policy decisions,” Isarescu said.
Romania’s annual inflation eased to an all-time low of 0.94% in May, from 1.2% a month earlier. The average annual rate decelerated slightly to 2.1%, from 2.5% at the end of April.
The central bank’s chief said some of the uncertain factors regarding the future evolution of the annual inflation rate include the prices of food items, the base effect of a five-percentage point cut in the bread sales tax, which is expected to fade away in September, as well as international oil prices.
However, if the annual inflation rate remains on a downward path, then the central bank could further reduce its key lending rate, Isarescu said.
The central bank on Tuesday held its monetary policy rate unchanged at 3.5% for the third consecutive meeting, but lowered the reserve requirements for foreign currency deposits to 16% from 18% previously.