Isarescu sees 3% inflation in 2007

Inflation could reach 3% in 2007, NBR Governor Mugur Isarescu told the final session of Romania’s Sustainable Development Strategy, “Orizont-2025” (“Horizon-2025”). The central bank expects next year’s inflation to be of about 7%. The NBR Governor says ensuring price stability (by curbing inflation) is the only specific goal of the monetary policy the central bank promotes in view of EU accession. The National Bank will resort to applying an inflation targeting monetary policy as of 2005, pursing an annual inflationary reduction by one quarter or one third of the increase in prices in the previous year. The gradual disinflation process that began in Romania in 2000 will be completed, the NBR Governor estimates, in 2006 (it took seven years in Poland). The service prices, the continued adjustments to the regulated prices and the increase in the domestic demand (population and governmental consumption) are some of the factors that will keep fuelling consumer prices, according to Isarescu. The service prices, which are much lower than in the developed countries, will constantly rise adding 2 or 3% to inflation until 2009. The adjustments operated for the regulated prices (such as that of the energy) will add up 1.5% to the consumer price index by 2006. NBR will pursue a “prudent monetary policy orientation in the next few years, so as to contain the expansion of the domestic demand within reasonable limits,” Isarescu stated. ZF