NBR wants inflation pegged to 7%

The National Bank of Romania proposes a 7% inflationary level and a one percentage point fluctuation interval for this indicator for 2005, when the direct inflation pegging is due for introduction, NBR vice-governor Cristian Popa on Wednesday stated. He specified that preparations for the introduction of the new regime would be finalised at the end of 2004, so as the direct pegging of inflation should be introduced in 2005. According to Popa, NBR will work with the Government in setting an inflation target. The projection will cover at least two years, although a three-year period may be used, as well, since this is compatible with the budgetary programmes taking into account a similar term.
The indicator to be used will be the consumer price index, since a derivative indicator is difficult to use. To that end, NBR’s responsibility will be delimited, as the central bank has no control over the administrated prices that are included in the consumer price index. The instruments used to implement the necessary monetary policy to attain the inflation target will be attracting commercial banks’ deposits, as well as the reverse-repo operations and the deposit certificates the central bank plans to introduce. ZF