Romania Central Bank Raises 2011 CPI Forecast To 3.4%

The bank also revised up the forecast for the 2010 inflation to 8.2% from 7.8%, as the July increase in the value added tax level is expected to drive prices higher, Isarescu said at the presentation of the third-quarter inflation report.

"The impact of the higher VAT was calculated at around 2.4 percentage points for the third quarter (…), but the figure might increase toward the year-end, when the direct effects of the VAT increase would have been exhausted," Isarescu said.

He said the annual inflation should remain at high levels until the second half of 2011, when the rate should enter a downward path.

Romanian inflation accelerated to a two-year peak of 7.7% in September, driven by the higher VAT.

According to estimates of the International Monetary Fund, the annual rate could peak slightly above 8% in December this year, before easing toward the central bank's band of 3% plus/minus one percentage point in 2011.

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