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Tuesday, May 6, 2008

Romania Central Bank Raises Interest Rates

Romania's central bank raised its main interest rate, already the highest in the European Union, by a quarter of a percentage point again today after inflation accelerated to a two-year high. The central bank raised the rate to 9.75 percent from 9.5 percent, effective from tomorrow.

The Banca Nationala a Romaniei has raised its Monetary Policy rate at every meeting since October, when it was 7 percent, as rising global food and fuel prices and a weaker currency spurred inflation, which accelerated to 8.6 percent in March.

The central bank board today also left its minimum reserve requirements on commercial bank deposits at 40 percent for foreign-exchange deposits and 20 percent for deposits in lei. It also set its next rate decision date for June 26.

``Annual inflation is likely to temporarily remain above the upper limit of the variation band around the target in the following months,'' the central bank said in a separate e-mailed statement today. Inflation pressure in recent months stemmed partly from ``a substantial increase of incomes and continued acceleration of expansion in credit to the private sector.''

Central bank Governor Mugur Isarescu, who targets inflation of between 3 percent and 5 percent this year, has predicted year- end inflation of 5.9 percent. The central bank missed its 2007 inflation target of 4 percent, plus or minus one percentage point, as consumer prices surged an annual 6.6 percent.

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