Central bank increases inflation forecast for 2008 and 2009

High demand, pessimistic scenarios related to the increase in administrated prices and a government decision to increase pensions led Romania's National Bank (BNR) revise the inflation forecasr by 0.6 percentage points, up to 6.6 percent, for 2008, above the inflation registered in 2007 (6.57 percent). This prognosis was made considering the oil price at $140 per barrel, according to BNR Governor Mugur Isarescu. "If slower growth of economy tempers the demand for oil, there could be an error, meaning we were too pessimistic. The inflation will go back in the inflation target margin next summer," Isarescu told a press conference yesterday. He added the economic growth will amount to 8-9 percent, while inflation will be around 6-7 percent.

Isarescu also discussed the new lending regulations that are to be enforced this year. A decision on the issue is to be made in the following two weeks. The new regulations are meant to curb lending, through harsher conditions for clients.

The inflation prognosis for 2009 was increased by 0.7 percentage points, up to 4.2 percent. Central bank's inflation target for this year is 3.8 percent plus/minus one percentage point, and 3.5 percent plus/minus one percentage point in 2009.