Central Bank To Up 2011 Inflation Forecast As Food, Energy Prices Surge

04.07.2011 By Florentina Dragu

Romanian central bank will revise upward its year-end inflation forecast, due to higher-than-expected international prices for energy and food items, central bank governor Mugur Isarescu said in an interview.

Romanian central bank will revise upward its year-end inflation forecast, due to higher-than-expected international prices for energy and food items, central bank governor Mugur Isarescu said in an interview.

Romanian central bank will revise upward its year-end inflation forecast, due to higher-than-expected international prices for energy and food items, central bank governor Mugur Isarescu said in an interview.

"The central bank targets price stability, there's no question about it.

The data we've gathered so far indicates the inflation will decelerate in the second half of the year. However, the impact of global surging prices for energy and food items changes, to some extent, the perspective regarding the evolution of the consumer prices index compared to earlier forecasts," Isarescu told MEDIAFAX reporters.

He said the new prognosis points to a higher inflation in 2011, but mentioned the exact figure will be released at the bank's next quarterly inflation report in May.

The central bank targets an annual inflation of 3% at the end of December, plus/minus one percentage point around the target. In February, the bank has revised upward its year-end forecast to 3.6%, from 3.4% previously.

"The fact that we've had a prudent approach in lowering interest rates has proved useful, as we are relatively well-placed with the monetary policy rate even in the context of the new perspectives," Isarescu said.

"Right now, the monetary policy rate is at an adequate level," he stressed.

End-March, the central bank left its main interest rate unchanged at a record low of 6.25% a year for a seventh straight time, while lowering the minimum reserve requirements for foreign currency liabilities to 20% from 25%.

Minimum reserve requirements on Romanian-leu denominated liabilities were kept at 15%.

Isarescu said the inflation rate could accelerate in the next few months, followed by a downward trend in the second half of the year.

Romanian consumer prices rose 0.77% on the month in February, while the annual rate accelerated to 7.6%. March figures are due for release next Monday.