BUCHAREST, Nov 11 (Reuters) - Romania's annual inflation slowed to 4.3 percent in October from September's 4.9 percent, in line with market expectations, the National Statistics Board said on Wednesday.
Monthly inflation was 0.4 percent in October, with higher prices for services due to a weaker leu and a 1.2 percent rise in tobacco prices due to a hike in excise duties, which prompted the central bank to revise its end-year forecast to 4.5 percent last week from a previous 4.3 percent.
Economists said they expect the central bank to keep rates flat at 8 percent, the highest level in the EU, at least until February as Romania struggles with a political deadlock that has stalled reforms and imperilled an IMF-led bailout package.
Political woes started with the collapse of the government early in October and are widely expected to last until after the outcome of a second round of presidential polls due on Dec. 6.
The central bank halted its rate easing cycle this month because of political risks, and 10 out of 15 economists expect it to hold fire once again at its next meeting on Jan. 5.
At 0802 GMT, the leu traded at 4.2930pe euro, little changed from levels before the announcement.
CPI (pct change) OCTOBER 2009 SEPTEMBER 2009
yr/yr 4.3 4.9
mth/mth 0.4 0.4
A Reuters poll of 15 analysts earlier this week forecast inflation at 4.3 percent in October. Price growth was seen at 4.6 percent in December, just above central bank's 2.5-4.5 percent target.
MELANIA HANCILA, VOLKSBANK IN BUCHAREST
'Chances are growing that the central bank will reach the upper limit of its inflation target if the exchange rate will not see massive weakening in the next months.'
'The evolution of inflation shows that monetary policy is too tight, and also that consumption continues to contract.'
RAFFAELLA TENCONI, WOOD&CO IN PRAGUE
'It was a good reading ... pretty much in line with my forecast and it pretty much means that inflations should be in target next year by Q2 at the latest.'
'But it doesn't change a thing for monetary policy. Without the IMF releasing its next tranche, the central bank will not make a move on interest rates.'
ROZALIA PAL, UNICREDIT TIRIAC BANK IN BUCHAREST
'It confirms that in the next months we can expect a (monthly) rise of 0.3-0.4 percent, which means the estimation for the end of the year is 4.6 percent.'
DAVID OXLEY, CAPITAL ECONOMICS IN LONDON
'We expect the central bank to remain in easing bias.'
'But taking into consideration the currency and ... political developments ... rates were left on hold.'
'I would imagine inflation isn't the fundamental driver for rates.'
NICOLAIE ALEXANDRU-CHIDESCIUC, ING BANK IN BUCHAREST
'After today's data release, chances have grown that inflation will end the year somewhere at 4.5 percent, within the central bank's target.'
'There really aren't implications for monetary policy. The last interest rate decision too was based on other factors.'
'I don't think we will see the next rate cut earlier than February. As long as political instability persists I don't think the central bank will cut rates.'