The central bank has introduced today its new currency, RON, equal to 10,000 units of the old currency (ROL) in a move aimed to put an end to a 15-year episode of hyper-inflation.
The denomination was planned to anticipate further disinflation, but it ironically coincides with several energy price hikes that may force the central bank to adjust the 7% yearend inflation target.
Furthermore, the 3pps VAT hike next year may further force the central bank to set a modest 6.5% yearend inflation target for 2006. The old currency will remain in circulation by the end of 2006 and will be indefinitely converted by the central bank. Companies will be required to use the new currency for bookkeeping as of this year.