The 8% inflation rate was predicted by "BURSA"

The Governor of the Central Bank of Romania (NBR), Mugur Isărescu, yesterday announced that at the end of 2010, the inflation rate would reach 8%.

"The estimate was also addressed to the International Monetary Fund. We must meet this figure. The end inflation forecast could categorically be revised following the information we receive. At this moment, our estimate is 8%, without a target revision", said Mugur Isărescu.

He added that the final forecast of the inflation rate will be published at the end of August.

The NBR estimates the inflation rate will increase by 3% following the raise of the VAT from 19% to 24%. The vice-governor of the NBR, Cristian Popa, said: "The good news that we did not incorporate into our scripts is the fact apparently several retail chains prefer to bear the raise of the VAT and to avoid transferring the hike over to consumer". He claims that the demand deficit is still conducive to disinflation.

The inflation target of the NBR for 2010 was 3.5%, with a deviation band of plus or minus 1%.

At the same time, the board of the IMF has approved the revision of the inflation target for 2010, which was set through the stand-by agreement with Romania, from 3.5% to 7.9%, after the raise of the VAT.

• Isărescu: "I have confidence in the leu""

The governor of the NBR, Mugur Isărescu, yesterday said that he trusts the national currency and he would keep his savings in lei, adding that the depreciation of the leu is natural. He said: "I have seen a mistaken information, being circulated, I need to correct it: "Not even the governor of the Central Bank trusts the leu, and he keeps his savings in foreign currencies". The fact that I no longer have any savings in lei is a decision motivated by family reasons, I had to pay back a loan in lei and I basically have no more savings denominated in lei. Of course, since my main reasons are in lei, this is the currency I will use for my future savings".

• The NBR could introduce further restrictions for loans denominated in foreign currencies

"When it comes to prudential norms, I do not rule out the introduction of further, more cautious restrictions when it comes to value of the loan compared to the amount of the collateral for loans denominated in foreign currencies", said the governor of the Central Bank, Mugur Isărescu. He said that the creation of higher loan provisions could be one such solution, but he said that these measures need to be studied carefully.

"Over the current period, the evolutions on the currency market have rekindled passions, and the emotional approaches, and I wouldn"t want anyone to think we are talking about prudential limits, instead of administrative limits, when it comes to loans denominated in Euros, and that we do not have confidence in the leu", said the governor of the NBR, who added that, it is quite the opposite, the Central Bank wants to prove its confidence in the national currency.

In turn, the deputy governor of the NBR, Cristian Popa, has shown that the issue of borrowing in foreign currencies is on the European agenda, and a unitary approach, which would also include the home countries of the parent banks could prove far more efficient. He said that apart from the cautiousness of the private sector, the banking system, even though facing restrictions for loans denominated in foreign currencies, will turn to the corporate sector and to lending in lei.