Romanian Inflation Hovers Around Three-Year Low After Rate Held

Andra Timu
·1-min read

(Bloomberg) -- Romanian inflation inched slightly higher from the lowest level in three years after drought and a clouded outlook for price growth forced the central bank to increase its forecast for this year.

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Consumer prices rose at an annual rate of 4.7% in October, compared with 4.6% in September, the statistics office in Bucharest said Tuesday. That’s slightly above the 4.6% median estimate in a Bloomberg survey of economists. Prices rose 0.6% from the previous month.

Central bank Governor Mugur Isarescu said Monday that the inflation forecast for the end of this year had been increased to 4.9% from previous estimate of 4% after a severe drought affected food prices, with fiscal risks further clouding the outlook.

The central bank held borrowing costs steady at 6.5% last week as policymakers opted to take more time to assess the impact presidential and parliamentary elections this month and next. Officials said they expected price growth to re-enter the target band of between 1.5% to 3.5% in 2025, but the outlook is clouded by the prospect of tax increases to trim a budget deficit that will likely exceed 7% of economic output this year.

“Given the risks and high uncertainty regarding the inflation and fiscal policy outlook, we expect the central bank to continue to show a prudent approach in the process of reducing the monetary policy interest rate,” said Nicolae Covrig, a Bucharest-based economist at Raiffeisen Bank. “We continue to expect the central bank to resume the key rate cutting cycle only in the second half of next year.”

--With assistance from Barbara Sladkowska.

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