Romania cbank raises key rate by 50 bps to 8 pct

BUCHAREST, Jan 7 (Reuters) - Romania's central bank raised its benchmark interest rate by 50 basis points to 8 percent on Monday in a move widely expected by analysts, saying the inflation outlook has worsened in the short-term.

The bank said it will continue to firmly manage money market liquidity via open-market operations.

"The short-term inflation outlook has worsened in the context of heightened macroeconomic risks, especially those related to the income policy and higher public spending in the run-up to forthcoming elections as well as uncertainties over investors' appetite for emerging markets risk," it said.

The central bank said that in this context it was essential that a temporary inflation deviation outside the target band should not trigger relaxed wage and fiscal policies.

Inflation hit post-communist lows early last year, but jumped well above the central bank's 3-5 percent target for 2007 chiefly because prolonged drought pumped up food prices.

Analysts expect the bank to barely meet the upper end of this year's 2.8-4.8 percent inflation goal as a better farming year will likely ease pressure on food prices. But they warned that government policies need to support the anti-inflation drive ahead of a parliamentary election in autumn 2008.