Isărescu needs to show how he will keep inflation in check this year

Governor Mugur Isărescu will have to convince in today’s press conference that the National Bank can keep prices in check in 2011 and rebuild trust in the NBR’s monetary policy, after in each of the last four years inflation was above target.
This is the governor’s first press conference this year, where he is set to present the inflation report for the fourth quarter of 2010, as well as make forecasts on the price trend over the next two years. Most analysts expect the NBR to come with a less optimistic forecast as far as this year’s price increase is concerned, after last autumn it expected inflation to slow down to 3.4% in December 2011, i.e. close to the official target of 3%. According to an internal survey conducted by the Association of Financial-Banking Analysts, the average analyst forecast for the 2011 inflation is 4.3%, i.e. also above the upper inflation target limit.
The main risks now have to do with the international trend of making food and fuels more expensive, which has already been felt on the Romanian market. Last year consumer prices climbed nearly 8%, although the official inflation target was 3.5%. The shock of the VAT hike from 19% to 24% in the summer, as well as the food price increases that occurred in autumn overturned the downward trend of inflation.