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Romania's Central Bank to lower inflation forecast

Romania's central bank may lower its year-end inflation forecast because some consumer prices rose less than expected in recent months, central bank Vice Governor Cristian Popa said. The central bank, which will release its quarterly inflation report and decide on whether to leave its benchmark interest rate unchanged on Aug. 9, said in May that it's keeping the target at 5% plus or minus a percentage point, though the inflation rate will exceed it at 6.8%. „At this point in time I can say that based on preliminary data our current forecast shows inflation for end-2006 closer to the actual target and the band around it, compared with the previous forecasting exercise of 6.8% made in May,” Popa said yesterday in an interview in Bucharest. He didn't say how much lower the inflation rate would be. Romania's central bank is working to keep inflation in check as the country prepares to join the European Union as early as Jan. 1. Romania's annual inflation rate at the beginning of this year was the highest among the four countries seeking EU membership. It fell below Bulgaria's in February and below Turkey's in March, and June annual inflation rate fell to 7.1% from 7.3% in May. Central bank Governor Mugur Isarescu on June 27 said the expansion of consumption became unsustainable because lending to households more than doubled at the end of May from a year ago, as he announced the central bank increased its key rate by a quarter of a percentage point to 8.75%. Romania's consumer prices probably rose by more than 1% in July from 0.15% in June as the government for the second time this year imposed higher excise duties for cigarettes, alcohol and gasoline, economists including ABN Amro bank Romania's head of research Radu Craciun said. (Bloomberg)