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Romania Central Bank revises inflation projection downwards to 3.3% this year, 3% in 2012

BNR governor Mugur Isarescu presented on Monday in a press conference the central bank's Quarterly Report on Inflation. The BNR Board analyzed and approved the document last Wednesday.

The National Bank of Romania has cut the inflation projection for 2011 from 4.6 percent to 3.3 percent, while for 2012 the forecast has been cut from 3.5 percent to 3 percent, Central Bank Governor Mugur Isarescu announced on Monday. He stressed the inflation could reach 2 percent in next March and added the prices would continue to drop in the upcoming period too.

The annual inflation rate fell to 3.45 pct in September from 4.25 pct in the previous month, returning after more than one year to the variation corridor around the target. The CORE 2 adjusted inflation rate also took a lesser dip to 2.72 pct in September as compared to 2.92 pct in August.

The reduction of the annual inflation rate was mainly the effect of the decrease over June-September in foodstuff volatile prices and of the first wave of the VAT increase fading out. According to the central bank head, the inflation rate could reach somewhere around two percent in March next year, or 'even less than that.'

'Prices will keep on sliding until next spring. The inflation rate is likely to get somewhere at 2 pct in March 2012, even less, and will rise slightly next summer, and will further follow a flatline,' said Isarescu.

The central bank also reduced its inflation projection for this year to 3.3 percent from 4.6 percent. On the other hand, the average annual inflation, rate for the past 12 months is still above 6 pct, the cited report shows.

The average monthly inflation rate over the first nine months of the year stood at 0.2 pct, down from the 0.7 pct registered in the same period of the year before.

BNR's inflation target is 3 pct this year and the target range is 2-4 pct (3% plus / minus one percentage point). However, BNR's latest inflation projection for this year was 4.6 pct.

Isarescu also said the central bank had relied on something when it had decided to cut the key interest rate from 6.25 percent to 6 percent, namely that the deflation would keep on. 'In spite of the turbulence in Greece, we cut the key rate. Why? Because we knew something, namely that the deflation would keep on and you are going to see other reasons too that made us do it', Isarescu explained.

With respect to inflation, the BNR chief stressed the most important indicator is the annual average inflation rate, that points to strengthened deflation.

'The inflation rate dropped significantly in the third quarter, we can say that even more than we anticipated and we entered inside the variation band around the target. The variations of the year-on-year inflation rate, the inflation in a month compared to the same month of the prior year had powerful shocks in the last 16 months due to the VAT rise. If we take the annual average rates, in the last 12 months, this indicator has a slower evolution, it adjusts more slowly to increase and to drop and we should, in the period ahead, look more carefully to the year-on-year inflation rate too in order to better see to what extent the drop is strengthened', Isarescu said.

Money market considerably below 5 pct in Q3 2011

In the third quarter of this year the money market stood in average below 5 pct, although it sometimes got close to 6 pct, governor of the National Bank of Romania (BNR) Mugur Isarescu told a press conference on Monday.

'As far as the reserve requirements are concerned, we don't need to take any action because there is an excess of liquidity on the Romanian market. If we calculated an average for the entire third quarter, we would find that the money market stood considerably below 5 pct, while punctually nearing 6 pct sometimes. The lack of trust and the crisis reflect into the banks' operations and the result is an excess of liquidity. Reducing the reserve requirement would boost this liquidity excess even more,' Isarescu said.

Sursa: http://www.actmedia.eu

Tags: inflation percent would isarescu annual romania central projection average bnr

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