ING has upgraded the inflation target for Romania from 5 percent to 5.7 percent for the end of 2011 as a result of an increase in the inflation rate announced by the National Statistics Institute in February, based on the perspective of the oil price, shows a report of the bank.

“We revised our inflation forecast as a consequence of the surprisingly high inflation and taking also into consideration the ING perspective regarding the oil price. Now, we expect the inflation rate to rise up to 8.4 percent in June and then to fall down at 6.2 percent in July. Due to some adjustments during the second half of the year, the inflation rate might be 5.7 percent (previous estimation was 5 per cent)”, according to the report.

The revision of inflation triggered the ING forecast of the monetary policy. The bank’s analysts advance an increase in the monetary policy rate to happen beginning with the the first quarter of 2012. ING impeaches the Central Bank (BNR) of “delayed reactions counting especially on the previous evolutions.”

The reports states that “it is difficult to strengthen the monetary policy in an economy that continues to be weak.” The bank based its forecast of an increase in the key interest rate by the end of this year (September or November) on the delayed impact that decisions of monetary policy have and a rise in inflation above the expectations of BNR. ING foresee a key rate of 7 percent by the end of 2012.

ING re-evaluated its perspective in terms of exchange rate RON/EUR from 4.25 to 4.15 for the end of the second quarter of 2011. The bank does not exclude an advance of the national currency up to RON 4.05 /EUR in the following three to six months. By the end of the year, ING estimates than EUR will be equivalent with 4.20 RON.

Teodora Vaduva, teodora.vaduva@romania-insider.com