Romania Inflation Drops to 2021 Low, Boosting Room for Rate Cuts

(Bloomberg) -- Romanian inflation slowed to the lowest pace since 2021, boosting scope for the central bank to press ahead with monetary easing after the first cut to interest rates in three years.

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Consumer prices in June rose 4.9% from a year earlier compared with 5.1% in May, the statistics office said on Thursday. That’s slightly above the 4.8% median estimate of economists in a Bloomberg survey. Prices rose 0.2% from the previous month.

Romania’s central bank cut borrowing costs last week, taking the key rate to 6.75%. Policymakers said inflation will subside at a quicker pace in the coming months, but risks persist from fiscal policy and the government’s need to narrow a budget deficit.

“Inflation will remain outside the target range in both 2024 as consumer demand will remain strong and in 2025 because of higher taxes and electricity prices,” said Dan Bucsa, a London-based economist at UniCredit. Still, the central bank will likely deliver another cut of 25 basis points by the end of the year, he said.

The central bank’s most recent forecast sees inflation at 4.9% at the end of this year and expects the rate to drop below 3.5% — the top end of its target range — only in early 2026.

--With assistance from Barbara Sladkowska.

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