Romanian Central Bank ups inflation forecast after VAT increase

Romania's Central Bank (BNR) has revised upward its forecast on the 2011 annual inflation to 3.4 percent from a previous 3.1 percent, Romanian Central Bank governor Mugur Isarescu said Thursday. The bank also revised up the forecast for the 2010 inflation to 8.2 percent from 7.8 percent, as the July increase in the value added tax level is expected to drive prices higher, Isarescu said at the presentation of the third-quarter inflation report. "The impact of the higher VAT was calculated at around 2.4 percentage points for the third quarter (…), but the figure might increase toward the year-end, when the direct effects of the VAT increase would have been exhausted," Isarescu said. Romanian inflation accelerated to a two-year peak of 7.7 percent in September, driven by the higher VAT. Romania increased its VAT from 19 to 24 percent during the summer, in order to increase budget revenues. Mediafax, Romania-Insider.com