NBR's inflation target unattainable until end of 2008

The Government’s revised euro convergence programme indicates that the inflation rate will fall within the limits accepted by the National Bank of Romania as late as the third quarter of next year. The NBR target will be met in the third quarter of next year, shows the Government’s revised Convergence Plan, which was approved at the end of last week, and forecasts a 4.8% increase in consumer prices for this year, and a 5.7% increase next year. “Maintaining the annual inflation rate on a trajectory compatible with meeting inflation targets in the medium run has recently become a major challenge for the central bank, given that the steady disinflation process carried out since 2000 was suspended in the third quarter of this year, after shock waves hit domestic and external markets,” reads the Euro Zone Convergence Programme. The NBR’s forecast was overturned following a drop in agricultural output (caused by drought) coupled with the correction in nominal terms of the RON exchange rate, amid instabilities on the external financial markets.