Yet, in the case of these countries, there is a real risk posed by speculative capital inflows. As long as negative real interest rates prevail in Europe, straying too far away from our regional peers in terms of policy rate would invite considerable appreciation pressures. While helpful in terms of taming inflation, these would not be welcome, given Romania’s increasingly significant external imbalance that is singular in the region in terms of size and trend. It owes to the faster growth of domestic absorption than that of domestic output, as well as to non-price competitiveness issues manifest in certain production sectors. Therefore, striking the right balance in terms of the interest rate differential is of the essence. After the tightening undertaken so far in Romania (including three policy rate hikes in the first half of 2018), it is probably wise to proceed cautiously in the future. 2/3  BIS central bankers' speeches  Which brings me to the last issue I would like to address: what is advisable in terms of economic policies in order to cope with any future adverse developments. For the sake of simplicity, allow me to try to formulate three general rules that are instrumental in dealing with such developments. First of all, irrespective of the possible scenarios, it is wise to put your house in order before the storm comes. One example is fiscal consolidation, which is paramount for the economy.
Mugur Isărescu: How CEE economies can face future policy challenges amid changing trade and monetary landscapes Opening remarks by Mr Mugur Isărescu, Governor of the National Bank of Romania, at the ECB conference ”Resilience to global headwinds? CESEE responses to a changing trade and financial landscape”, Session "Responses to monetary policy and financial shocks", Frankfurt am Main, 12 June 2019. * * * Ladies and gentlemen, The two keynote speakers shared with us insightful thoughts about the consequences of monetary policy and financial shocks and about the responses of CEE countries. My intervention will be structured around three issues. First, I will refer to the impact on emerging economies in the EU expected to be exerted by monetary policy normalisation in the euro area. Second, I will tackle the subject of how inflation targeting has adapted to the post-crisis global economic and financial landscape. Finally, the topic of what the CEE economies need to do in order to cope with any strong volatility headwinds will be touched upon. There is no doubt that the recovery of the EU economy in the past years was largely due to major central banks’ non-standard operations, as well as to very low interest rates. We all know that the reversal of this process also has substantial implications for the economic development, mainly through the influence of monetary policy normalisation on financing conditions or capital inflows.