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POLL-Romania central bank seen hiking rates on Jan 7 

* What: Romanian interest rate decision; inflation data 

* When: Central bank meets on Jan. 7; Dec. CPI on Jan. 11 

* All economists polled by Reuters expect the central bank  to hike rates next week, with nearly all seeing a hike of 50  basis points to 8 percent. Analysts estimate December inflation  eased slightly to 6.6 percent from 6.7 in November.

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	ANALYSIS-Economic imbalances to extend Romanian leu fall

By Marius Zaharia

BUCHAREST, Jan 4 (Reuters) - Romania’s central bank is  widely expected to hike rates next weak and again in February to  prevent a weakening leu currency from shattering its ambitious  inflation target for the second year in a row.

Twelve out of 13 analysts polled by Reuters see a rate hike  of 50 basis points to 8 percent in January and one sees rates at  7.75 percent.

Nine of them expect another hike in February.

“We expect the central bank to defend its credibility by  hiking the rate to 8 percent in January and delivering at least  another 50 basis points tightening in the first quarter,” said  Ciprian Dascalu, trader at Millennium Bank in Bucharest.

“Risks (are) biased towards a more aggressive reaction if  the leu remains under weakening pressure.”

One of Europe’s best performing currencies in the first half  of last year, the leu has fallen steeply against the euro  <EURRON=> from a five-year high in the summer due to worries  over the sustainability of Romania’s fast economic growth.

Analysts expect the leu to remain emerging Europe’s punching  bag this year. 

A shaky international environment highlights   Romania’s ballooning current account gap and a lack of policy  response to it.

HARD BATTLE

The poll’s mid-range forecast showed the central bank  missing its 3-5 percent 2007 inflation goal by a wide margin.  

December inflation is forecast at 6.6 percent, from 6.7 percent  a month before and compared with 4.9 percent in December 2006.

Prices rose faster than expected last year mainly because   drought helped to drive up food prices.

Monthly inflation is seen up by 0.7 percent, from 0.9  percent in November, driven mainly by increases in fuel and  thermal energy prices and the leu’s depreciation, which raises  the cost of imported goods.

The central bank is seen just meeting the upper end of this  year’s 2.8-4.8 percent inflation goal because analysts expect a  better farming year to reduce price growth by the end of the  year from a peak of over 7.5 percent in the first half.

But much depends on how far the government is prepared to  act to support the anti-inflation drive ahead of a parliamentary  election in the fall of 2008.

The central bank has repeatedly urged the centrist  government to tighten fiscal policies, improve the spending  structure and keep wages in line with productivity to help  contain inflation and boost economic competitiveness.

Romania targets a budget deficit of 2.7 percent of GDP in  2008, but observers say that should be cut significantly.

“The very ambitious inflation targets for the next two years  could be reached only with support from fiscal and budgetary  policy and income policy,” said Ionut Dumitru, head of research  at Raiffeisen Bank in Bucharest.

Categories: Grupa IV
Tags: economie, finante, inflatie, leu, prognoza