The world economy is facing tremendous difficulties. I express my confidence that, the coordinated and appropriate policies of the most developed international economies will help prevent a crisis similar in size to that of 1929-1933. It is beyond any shadow of a doubt that this period will have a decisive impact on the world economic model. During such hard times worldwide, it is necessary, now more than ever, that the Romanian authorities should exert caution and wisdom as concerns both public spending and specific promises. The run-up to elections is usually a period when hard to keep promises are easily made. At present, however, despite the most difficult international economic conditions in the post-war period, the pre-election public promises seem far more unrealistic. I would like to reiterate the fact that the NBR policies focus on the euro adoption in 2014. In the medium run, we envisage not only the resumption of disinflation and bringing price hikes in line with the European standards, but also the alleviation of imbalances, especially the gradual narrowing of external deficit, in order to render disinflation sustainable. In terms of monetary policy, it is crucial to foster savings with a view to narrowing the current gap in relation to investment. The increased contribution of the domestic component, amid the rise in saving ratio, can ensure the same high investment rate. In fact, the increase in interest rates, which is part of the current monetary policy stance, was aimed at fostering savings.
A gradual normalisation of the interest rate level and a larger supply of new dwellings are expected to curb the rise in resale home prices in the years ahead. The question of whether financial stability considerations should be explicitly included in monetary policy is a subject of widespread debate, both in academia and within central banks. The answers diverge and international consensus has not yet been reached. A flexible inflation targeting regime provides scope for taking into account the impact of potential financial imbalances on future inflation and output. Asset prices and household credit and debt are inputs for the analysis of future developments in inflation and the output gap. In this way, the assessment of asset prices and debt levels may influence interest rate policy. Furthermore, it is important to keep in mind that the unwinding of financial imbalances may lie many years ahead, well beyond the horizon for the inflation target. It is questionable whether monetary policy today should respond to potential repercussions of possible financial imbalances well beyond the monetary policy horizon. First, it is well documented that asset price bubbles and financial imbalances are very difficult to identify ex ante. Second, the appropriate timing of a proactive monetary response is likely to be difficult to determine, given the lags in the impact of monetary policy.