Romania Central Bank Ups 2011 Inflation Forecast To 3.6%

For 2012, the bank forecasts an annual rate of 3.2%, Isarescu said at the presentation of the quarterly inflation report.

Romanian inflation came in at 7.96% at the end of 2010, above the central bank's upper target of 4.5%, largely due to a higher sales tax.

"The inflation in the fourth quarter was in line with expectations (…), mainly due to the higher value added tax rate," Isarescu told the news conference. He said further factors that blocked the disinflation process were higher food and fuel prices, as well as a stronger US dollar against both the euro and the Romanian leu.

On a positive note, Isarescu said the weak domestic demand helped ease inflationary pressures during the fourth quarter of 2010.

The leu's relative stability against the euro and the absence of inflationary pressure in the workforce sector also had a positive impact on inflation, he added.

The central bank estimates the disinflation process will resume during the first quarter of 2011.

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