Isărescu: Inflation to stop at 8%, hopefully exchange rate will help
Central bank Governor Mugur Isărescu yesterday had his first
public appearance since the Government's decision to raise the VAT
from 19% to 24%; he announced that inflation would go up to 8% by
the end of the year, from 4.4% in May. Isărescu hinted that he
would use the exchange rate to contain the rise in inflation, as
many goods and services are priced in or tied to euros. At the same
time, a stronger RON will help those with loans in foreign
currency, thus reducing deterioration pressures on the loan
portfolios, given that the Government is preparing a wave of
redundancies. More than 62% of the loans taken out by individuals
are foreign currency-denominated. Although it did not say so
directly, the NBR will target the exchange rate and will not allow
for a substantial increase.
"We will carefully and vigilantly watch the action of the players
on the commodities market. We are also seeing, and it is
encouraging and good for the price stability, that, as far as the
RON's exchange rate is concerned, it is naturally recovering and we
hope it will stabilise soon. We hope to have not only the forex
market stabilise, but also the exchange rate at levels that are
better for inflation, but also to be able to stabilise and restore
confidence on the monetary market in terms of interest levels," the
governor said at the end of a seminar on the risks of foreign
currency lending organised by the NBR.