NBR forecasts severe inflationary risks in the second half of the year and has revised its projection downwards, anticipating an increase of 6%, compared with 5.9%, the level announced in February.
With this adjustment the central bank is getting close to what the market expected, as most analysts forecast inflation at 6% or even higher this year.
"The trajectory is no longer far off from the interval accepted. We will remain outside the interval until the end of the first quarter of 2009, but will start to follow a significant downward trend towards the end of the year," Mugur Isarescu, NBR Governor, yesterday explained during the presentation of the First Quarter Inflationary Report.
"We are seeing a slight decline in the monthly inflation rate, from 1% last autumn to 0.6% in March. It's a bit less than we had expected, we would have liked a more serious decline," the governor commented.
He explained that inflation over the last 12 months ended in March was 75% caused by eight product categories, with the most powerful influences coming from bakery products, vegetable oil, imported fruit (whose price increased due to the depreciation of the RON), and fuels and telecommunications. For instance, vegetables, fruit and eggs were over 20% more expensive compared with the same time last year. "These are sensitive products, that have an immediate effect on the living standards and therefore induced pressure to increase wages," the governor noted.
The central bank revised its projection for next year downwards, given that it anticipates a significant decline in the monthly rate of price increase as of the end of this summer. Prices of agricultural products should play a significant part in this, as NBR hopes this farming year will be "at least normal".
The inflation will therefore go down to 3.5% in December 2009, that is 0.4% below the
