The central bank will ``closely monitor developments in macroeconomic indicators and assess their outlook, standing ready to adjust instrument settings to counteract inflationary pressures,''
The bank has raised rates at every meeting since October to counter rising prices. Inflation in February was the fastest in two years as a drought boosted food prices and a weaker leu raised the cost of imports and services.The inflation rate rose to 8 percent in February, the highest since March of 2006, from 7.3 percent in January and 6.6 percent in December, the National Statistics Institute said on March 11.
The central bank also said inflation will likely remain above its targets ``in the following months'' because of higher food and fuel prices. It set its next rate decision for May 6.
One of the issues that all of this raises is the extent to which any local tightening policy can work at all whil private indebtedness - which grew an annual rate of 66.8% percent in January - continues to be fuelled by foreign exchange denominated (largely euro) cheaper interest loans, which grew at an astonishing and alarming 143.4% annual rate year on year in January. If you look at the chart below you will see that the level of leu denominated loans is virtually stationary, while the forex ones go through the roof. This situation reduces the central bank to the a role of a virtually impotent bystander.