BNR downwardly adjusts its 2009-2010 inflation projections

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The National Bank of Romania has downwardly adjusted by 0.1 percentage point its 2009 inflation projection, from 4.5 percent included in its quarterly inflation.

report released in February 2009, to a current 4.4 percent, BNR Governor Mugur Isarescu reported on Thursday.
The 2010 inflation projection has also been downwardly adjusted by 0.4 percent, from 3.2 percent to 2.8 percent, said Isarescu.
BNR has also downwardly adjusted the CORE2 basic inflation for 2009, from 2.4 percent to 1.4, but has upwardly adjusted the other components.

Thus, increasing excise duties ahead of initial schedule should influence inflation by one percentage point, compared with 0.8 percentage point as reckoned in the February 2009 projection; the influence of fuel prices has been adjusted from 0.3 percentage point to 0.7 percentage point; the influence of volatile prices is now 0.4 percentage point, from a previous 0.3 percentage point, while administered prices should now influence inflation by 0.9 percentage points, up from a previous 0.7 percent.

The new BNR projection for CORE2 basic inflation for 2010 is 0.5 percent, down from 1.3 percent from the February 2009 report; the influence of excise duties is now 0.7 percent, up from a previous 0.6 percent; fuel prices should influence inflation by 0.8 percent, up from 0.7 percent; volatile prices by 0.2 percent, up from zero percent; while administered prices are expected to influence inflation by 0.6 percent, equal to the previous projection.

The 2009 and 2010 inflation targets have been affirmed at 3.5 percent, plus/minus one percentage point, affirming the February 2009 working hypotheses.

Isarescu also said that keeping inflation near to the projected trajectory is conditional upon the developments in the external factors as well as on the firm and consistent implementation of the economic policy mix and the structural reforms agreed upon by Romania in it arrangement with the International Monetary Fund (IMF), the European Union and other international financial institutions.

‘The risks associated with inflation projection seem relatively balanced, and their balance indicates that there is a moderately higher probability of downward trends from the projected trajectory of the inflation,’ said Isarescu.

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