BNR Ups Inflation View To 5.1% In 2011, 3.6% In 2012

05.05.2011 ZF English

The Romanian central bank revised upwards its forecasts for 2011 and 2012 annual inflation to 5.1% and 3.6%, respectively, due to higher oil prices and additional inflationary expectations, governor Mugur Isarescu told a news conference Thursday.

Previously, the bank expected the annual inflation at 3.6% in 2011 and at 3.2% in 2012.

Isarescu said the inflation rate will re-enter the variation interval targeted by the central bank in the first quarter of 2012. The central bank targets an annual inflation of 3% at the end of the year, plus/minus one percentage point around the band.

However, the governor said the forecast for the end of 2011 doesn't include a possible increase in thermal energy prices in the last part of the year.

Romania's annual inflation rose to 8% in March, the highest figure since August 2008. The spike in inflation was due to higher food and oil prices on international markets, but also to a five-percentage point increase in the value added tax in July 2010.

Isarescu said the annual rate will continue to remain high in the second quarter, on a negative base effect.

The central bank expects the disinflation trend to resume in the second half of this year.

The oil prices and the volatile prices are the biggest upside risks for the inflation in the coming period. On the other hand, a reduction in first-round effects of the VAT increase and a good farming year might sustain the disinflation process, Isarescu said.

Food prices have led the inflation increase this year, but the Romanian leu's appreciation has dampened import prices and helped mitigate larger shocks, Isarescu also said.