Yesterday the inflation data for the EU countries was released. For the euro zone inflation remains high at 2.7% while the ECB target is at “utmost 2%”. If these were normal times (i.e. before 2007) the headlines in the mainstream media would have demanded ECB to take immediate action. Continue reading
Tag Archives: Inflation targeting
In my last post I was arguing mostly from a theoretical point of view that Inflation Targeting has failed in Romania. To be fair it was never been given a fair chance. Two years into implementing the regime the NBR decided not target inflation but the exchange rate . One perverse result from this in an economy with historically high inflation and no growth is dominance of local currency by ones from countries with economic growth and low inflation. In other words the central bank has implicitly subsidized the dominance of EUR by undermining RON.
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Assessing Romanian monetary policy should be simple. The Inflation Targeting regime should be transparent enough that based on current and forecasted inflation one should be able to guess the future path of the interest rates. In the end this is what matters for an economy: the future price of money/debt. Continue reading