“It’s very likely that inflation will be within the target ceiling by year-end and it will remain near the target through 2012 as well,” Popa said.
Popa said the disinflation process was in line with the central bank’s expectations, as the effects of a five percentage-point increase in the value added tax have dissipated. Additionally, food prices were lower than anticipated, further contributing to inflation easing.
He said the central bank made the right choice to maintain its monetary policy at steady levels following the VAT hike, but warned of an opposite base effect in 2012 that could trigger an adjustment of the monetary policy stance.
The central bank Thursday left its main interest rate at a record low of 6.25% a year for the eleventh straight time, damping hopes for a monetary easing to help bolster lending.
However, the bank said it would gradually adjust its monetary policy stance, in line with the developments in international markets and with the evolution of Romania’s commitments assumed under the financing agreements with international institutions.
The central bank targets an annual inflation of 3% at the end of 2011, plus/minus one percentage point around the band. The bank recently revised downward its forecast on the year-end inflation to 4.6% from 5.1%, citing improved economic conditions and less volatile prices.