December 2007 inflation rate could widen to 6.9%, beating the central bank's target

Publish date: 11-01-2008
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Annual inflation in December last year could reach a maximum of 6.9 percent, exceeding by far the upper targeted limit of 5 percent set by the Central Bank of Romania; the higher inflation is the result of the leu's drop and the drought seen last summer, which inflated food prices, analysts said.

Leu's depreciation will boost the price of services, believes ING Bank Romania's senior economist, Nicolaie Alexandru-Chidesciuc. The official estimates annual inflation in December 2007 should stay at 6.7 percent.

Lucian Anghel, the chief economist of Banca Comerciala Romana, believes the depreciation of the leu will present a threat for inflation in the first part of the year. The chief analyst of Romania's largest bank by assets said December 2007 should see a 6.6-6.9 percent inflation rate.

Anghel believes inflation will temper in the second part of the year. Ionut Dumitru, the chief economist of Raiffeisen Bank Romania, forecasts a 6.7 percent inflation for December last year. The bank official said it is not likely for the inflation to narrow to the target released by the central bank (BNR).

Dragos Cabat, the head of Chartered Financial Analysts (CFA), emphasized a come back of the inflation to BNR's target is impossible this year and a realistic forecast for 2008 refers to a 5.5-5.8 percent inflation rate at the end of the year.

Cabat chose a 6.9 percent estimate regarding the December 2007 inflation rate. BNR last year missed  for the second time the inflation target, after setting it at maximum 5 percent.
 
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