Romanian Central Bank Ups Forecast Inflation Rate

The National Bank of Romania (BNR) has increased the forecast inflation rate for the entire year by 0.1 percentage points from 6.6% to 6.7%, Governor Mugur Isarescu announced. The forecast for 2009 has been increased from 4.2% to 4.5%. The governor explained the changes by inflationary pressure caused by an economic growth rate faster than anticipated, as well as by more generous fiscal policies and higher salaries. Also, BNR estimates higher imports, mildly attenuated by a better price for oil. He stressed that the previous forecast had been calculated on a fuel price of 140 USD/barrel, which had in the meantime dropped to half as much. As for 2010, Governor Isarescu said the inflation target was not included in the report because of many uncertainties generated by the international financial crisis. He added that the inflation target for 2010 would be announced in the first quarter of 2009. He said the economic growth rate could slow down harder than the previously anticipated 5-6%, unless investments were directed towards Romania\"s weakest points, such as infrastructure and agriculture. Referring to liquidities on the banking market, the government stressed there was no liquidity shortage and that banks had created the minimum mandatory reserves on 24. October. BNR will allow the RON-denominated liquidities from the banks\" reserves to enter the market, when such liquidities would go to RON-denominated loans and when forex-denominated loans would be on a clearly downward trend. According to him, these measures are intended to mitigate the impact of the international financial crisis. Referring to Standard & Poor\"s recent decision to downgrade Romania\"s rating from \"investment\" to \"junk,\" Governor Isarescu said the agency should rework their analysis because the public debt was sustainable, well below the 60% of the GDP level imposed by the Maastricht Treaty, the only problem being the current account deficit. \"We would like to ask S&P to rework the two pages they wrote entirely besides the point,\" the governor said. Speaking about the recent controversy over the idea to increase the teachers\" salaries by 50%, Governor Isarescu said: \"Two-digit salary raises are entirely not in line with the ambition to keep inflation under control. Even speaking about such great salary raises is damaging our country.\"