Central bank Governor Mugur Isărescu yesterday had his first public appearance since the Government's decision to raise the VAT from 19% to 24%; he announced that inflation would go up to 8% by the end of the year, from 4.4% in May. Isărescu hinted that he would use the exchange rate to contain the rise in inflation, as many goods and services are priced in or tied to euros. At the same time, a stronger RON will help those with loans in foreign currency, thus reducing deterioration pressures on the loan portfolios, given that the Government is preparing a wave of redundancies. More than 62% of the loans taken out by individuals are foreign currency-denominated. Although it did not say so directly, the NBR will target the exchange rate and will not allow for a substantial increase.

"We will carefully and vigilantly watch the action of the players on the commodities market. We are also seeing, and it is encouraging and good for the price stability, that, as far as the RON's exchange rate is concerned, it is naturally recovering and we hope it will stabilise soon. We hope to have not only the forex market stabilise, but also the exchange rate at levels that are better for inflation, but also to be able to stabilise and restore confidence on the monetary market in terms of interest levels," the governor said at the end of a seminar on the risks of foreign currency lending organised by the NBR.

Central bank Governor Mugur Isărescu yesterday had his first public appearance since the Government's decision to raise the VAT from 19% to 24%; he announced that inflation would go up to 8% by the end of the year, from 4.4% in May. Isărescu hinted that he would use the exchange rate to contain the rise in inflation, as many goods and services are priced in or tied to euros. At the same time, a stronger RON will help those with loans in foreign currency, thus