BUCHAREST, Nov 12 (Reuters) - Romania's annual inflation rate jumped to 6.8 percent in October from September's 6 percent, due to strong pressure from food prices and energy rises, boosting expectations for a rate increase next year.
Inflation was 1 percent month-on-month in October, with food and non-food prices growing 1.3 and 0.7 percent respectively due mainly to a 2.9 percent jump in milling products and a 3.7 percent gas price rise. Services prices rose around 1 percent.
The INS said the European Union harmonised index was up 4.6 percent on the year.
Analysts polled by Reuters last week had produced a mid-range headline inflation forecast of 6.7 percent.
Statistical data showed the indicator of prices excluding administrative prices rose 1 percent month-on-month in October.
"We expect this to have been the peak of price growth this year," said Ionut Dumitru, head of research at Raiffeisen Bank in Bucharest. "I don't think anyone still believes the inflation target can be met."
The central bank raised its annual inflation forecast last month to 5.7 percent in December from a 3.9 percent previous prediction, citing higher food prices and a worsening outlook for the local leu currency.
In its quarterly prediction report on Monday, the national forecast commission has also revised up its prediction for this year's inflation to 6 percent from 4.5 percent and next year's figure to 4.5 from 3.8.
The central bank targets inflation at 3-5 percent and 2.8-4.8 percent this year and next, respectively.
Analysts say pressures from wages and a loose fiscal policy are to continue in 2008, an election year, and a vast external deficit is likely to partly offset an expected rise in the leu, forcing central bankers to hike rates again in January.
The bank raised interest rates 50 basis points to 7.5 percent at its board meeting on Oct. 31, reversing some of the monetary easing earlier this year.
"Given these figures, it is possible to see year-end price growth of 6 percent provided that a slowdown in (inflation) rates would occur in November and December," said Catalina Constantinescu, ABN Amro analyst in Bucharest.
"If inflation will be higher than 6 percent we can expect the central bank to react," she said.
At 0915 GMT, the leu was quoted at 3.4283/43 versus the euro
, recovering from a new 2007 record low of 3.4330 hit earlier in the session. (Additional reporting by Luiza Ilie; editing by Gerrard Raven)