Central bank Governor Mugur Isărescu yesterday had his firstpublic appearance since the Government's decision to raise the VATfrom 19% to 24%; he announced that inflation would go up to 8% bythe end of the year, from 4.4% in May. Isărescu hinted that hewould use the exchange rate to contain the rise in inflation, asmany goods and services are priced in or tied to euros. At the sametime, a stronger RON will help those with loans in foreigncurrency, thus reducing deterioration pressures on the loanportfolios, given that the Government is preparing a wave ofredundancies. More than 62% of the loans taken out by individualsare foreign currency-denominated. Although it did not say sodirectly, the NBR will target the exchange rate and will not allowfor a substantial increase.
"We will carefully and vigilantly watch the action of the playerson the commodities market. We are also seeing, and it isencouraging and good for the price stability, that, as far as theRON's exchange rate is concerned, it is naturally recovering and wehope it will stabilise soon. We hope to have not only the forexmarket stabilise, but also the exchange rate at levels that arebetter for inflation, but also to be able to stabilise and restoreconfidence on the monetary market in terms of interest levels," thegovernor said at the end of a seminar on the risks of foreigncurrency lending organised by the NBR.
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