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Nov 05, 2007 14:53 EEST
(adds quotes, details)</p>BUCHAREST
November 5 (SeeNews) - Romania's central bank, BNR, has raised its annual inflation forecast for 2007 by 1.8 percentage points to 5.7%, beyond its target band, and has revised upward its end-2008 inflation projection to 4.3% from an earlier 3.7%, BNR's governor Mugur Isarescu said on Monday.
In August BNR projected end-2007 inflation of 3.9% and an inflation of 3.7% for end-2008. BNR, which switched to direct inflation targeting in 2005, has put its inflation target for this year in a range from 3.0% to 5.0%.
The BNR has revised its 2007 and 2008 inflation forecasts because of the more severe than expected effects of this summer's drought, the significant rise of the international prices of cereals, the correction of the exchange rate of the Romanian currency, and the deteriorating inflation expectations, Isarescu told a news conference presenting BNR's quarterly inflation report.
"The inflation in the last quarter was boosted mostly by food prices", Isarescu said. "From a favourable situation at the end of May, in less than two months prices have surpassed the upper margin."
For the first time all forecasted risks have become a fact, Isarescu said, adding that wages continue to grow faster than the country's industrial productivity, creating another precondition for a surge in inflation.
The average net monthly salary in Romania rose in September by a nominal 1.0% month-on-month to 1,040 lei ($447.6/309.4 euro), the country's statistics board, INS, said earlier on Monday.
Isarescu called on the government to pursue a restrictive monetary and fiscal policy and proceed with the structural reforms which would boost the productivity and competitiveness of Romanian products abroad.
BNR has confirmed its 2007, 2008 and 2009 inflation targets at 4.0%, 3.8% and 3.5%, respectively, with a target band of one percentage point.
(1 euro = 3.3612 Romanian lei)
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