Tuesday, March 11, 2008

Romania inflation rises to 8 pct y/y in February

BUCHAREST, March 11 (Reuters) - Romania's February annual inflation rose to 8 percent, its highest level in almost two years, boosted by hefty rises of natural gas tariffs and fuels, the National Statistics Board (INS) said on Tuesday.

Price growth is expected to rise further, peaking at some 8.5 percent, according to analysts' forecasts, and putting pressure on the central bank to raise borrowing costs.

Analysts polled by Reuters earlier this month had produced a mid-range headline inflation forecast of 8.1 percent in February, compared with January's inflation of 7.3 percent.
"The figure is not surprising at all. The impact from gas price hikes is set to continue next month," said Ionut Dumitru, head of research at Raiffeisen bank in Bucharest.

"This is fuelling inflationary pressures and may prompt the central bank to further raise rates by 50 basis points to 9.5 percent," he said.

Romanian inflation surged in the second half of last year because of rising food prices and global turmoil on financial markets which has weakened the leu currency.

The central bank forecasts December inflation at 5.9 percent, well above this year's 2.8-4.8 percent target range. It expects price growth to peak in March at 8.3 percent.

Prices rose 0.7 percent on the month in February, with non-food prices recording the steepest rise at 1.1 percent. Food prices rose 0.4 percent, while services were 0.5 percent up.

The INS said the European Union harmonised index was up 5.5 percent on the year. The indicator of prices excluding administered prices grew by 0.4 on the month in February.
At 0820 GMT, the leu traded firmer following the data release, at 3.7040 against Thursday's close of 3.7263. (Reporting by Radu Marinas, Editing by Mike Peacock)

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