Romania wage hikes to pressure CPI in 2007 paper

BUCHAREST (Reuters) – Strong wage pressures are a key concern in Romania’s fight against inflation this year, its first in the European Union, central bank governor Mugur Isarescu said yesterday. Lower price growth last year surprised analysts and drove inflation to post-communist lows of 4.7 percent in November. But the central bank has repeatedly said it expected price pressures to resurface in 2007, particularly as fast economic growth and EU membership fuel wage demands. «The main uncertainty for inflation this year will be wage rises,» Isarescu was quoted saying by daily Ziarul Financiar. Official forecasts show wage gains at 12 percent this year, compared with 17 percent in the first 10 months of 2006, much higher than inflation. «There will be strong pressure on wages, which will assert itself immediately, as seen in all countries that have joined the EU,» Isarescu was also quoted saying by daily Adevarul. «The only hope is this wage spiral will be reasonable.» The central bank kept its key interest rate unchanged at 8.75 percent in December, but vowed to keep its monetary policy hawkish next year to keep pressures in check.

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