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Isarescu: It is important to maintain economy on growth trend

Governor of the National Bank of Romania (BNR) Mugur Isarescu said on Tuesday in Constanta that it is important to maintain our country's economy on a growth trend and at the same time to protect the macroeconomic balances regained following the adjustment process which took place after the international financial crisis.

"It is important to keep the economy on a growth trend, being at the same time extremely careful to protect the macroeconomic balances regained following a painful adjustment process that has taken place after the international financial crisis. The only way to go forward is to resort to a coherent mix of macroeconomic policies and firm structural reforms aimed at enhancing the growth potential of the economy and, at the same time, at increasing its resistance to shocks. This approach should not leave room to pro-cyclical policies," Isarescu said in the dissertation held at "Ovidius" University, on the occasion of receiving the title of Doctor Honoris Causa of the higher education institution.

According to him, the monetary policy must act in an anti-cyclical manner, but also be flexible.

"In order to maintain the coherence and sustainability of real convergence, the monetary policy must not only act in an anti-cyclical manner but also be flexible while avoiding extremes. On the one hand, it is important not to ignore in any way the threat of inflation for the sake of a prosperity gained quickly and easily (and therefore illusory). On the other hand, however, it should avoid becoming, to quote Mervyn King, - ?obsessed with inflation'. BNR has never enjoyed the luxury of concentrating exclusively on price stability and the use of the interest rate in the hope that financial stability and the stability of the exchange rate will follow on their own. In the context of the free circulation of capital and of the significant degree of euroisation, it is obviously an illusion that aggregate demand could be managed only by the leverage of interest rates," said the BNR governor.

Mugur Isarescu also said that what matters for real and nominal convergence is the coherence and the sustainability of the process.

"Beyond targets and levels, and regardless of the scale of the gaps that an economy needs to make up for or the monetary policy regime a central bank opts for, what matters for the real and nominal convergence is the coherence and sustainability of the process. In other words, to be and stay on the right path," said the BNR governor.