Romania Central Bank To Raise Inflation Forecast In May

"I don't think the year-end prognosis will be higher than 5%," Vasilescu said Tuesday.

The central bank targets an annual inflation of 3% at the end of 2011, plus/minus one percentage point around the band. In February, the bank revised upward its forecast on the year-end inflation to 3.6%.

According to Vasilescu, the new prognosis will also consider possible increases of local gas and energy tariffs in 2011.

He said the inflation rate is expected to fall substantially once the impact of a 5 percentage point increase in the sales tax start to fade.

In July 2010, the government increased the value added tax rate to 24% from 19% previously, in a move to cut the budget deficit and jumpstart the economy. The measure had a negative effect on inflation, which reached 7.96% in December 2010, well above the central bank's upper target of 4.5%.

Romania's consumer price index rose 8.01% in March from the same month a year earlier, driven mostly by costlier food and fuels. It was the highest figure since August 2008.

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