Ctrl Bker Warns Against Danger Of Inflationary Spiral

Romania’s central bank governor Mugur Isarescu on Tuesday said wage increases need to correlate with labor productivity to prevent creating an “inflationary spiral,” which is very hard to control.

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“Experience tells us that once this spiral takes shape, it forms a vicious circle, which disadvantages everybody,” the banker said.

Isarescu met with Prime Minister Calin Tariceanu and minister of economy and finance Varujan Vosganian to discuss coordinating government’s fiscal-budget policies with the central bank’s monetary policy, to keep inflation within this year’s target band.

The governor approved government’s strategy to adopt a rational wage policy and correlate wage increases with labor productivity. He said a balance between the two aims to stabilize the fluctuations of the national currency leu.

Isarescu added that wage increases above the sustainable economic threshold might affect the leu.

The Romanian leu, which has recently touched a three-year low against the euro, is seen recovering in the following period.

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