Isarescu also said he was starting to believe the benchmark interest rate had peaked at 7.0%.
He said the economy would likely grow around 3% overall this year, adding the bank's objective has been to put the brakes on price growth without triggering a recession. Earlier this week, policymakers held the benchmark interest rate at 7.0% for the third consecutive time, saying inflation would fall sharply in the short-term while a slowdown in economic growth would be subdued in the first and second quarters. The bank expects inflation at 7.1% in December, compared with a previous forecast of 7.0%, influenced by European vegetable prices, with supply hurt by earthquakes in Turkey and the war in Ukraine.
It sees inflation at 4.2% at end-2024, unchanged from the previous forecast and above its 1.5%-3.5% target band. Annual inflation stood at 11.23% in April, data showed on Friday. Analysts have said they expect policymakers to keep rates on hold throughout 2023 and likely instead use market liquidity management as a tool to loosen or tighten policy depending on exchange rate developments and inflation readings. On Friday, Isarescu said the bank had allowed the Romanian leu a bit more flexibility, albeit in a tight range. The leu was flat on the day. Isarescu also said he was neither bothered nor pleased by the current excess market liquidity, but warned of uncertainties over capital flows. "Sometimes it is harder to sail in a flood than in a drought," he told reporters. (Reporting by Luiza Ilie; Editing by Alison Williams)
