Thursday, November 7, 2013

Romania Trims 2013 Inflation Forecast for Third Time This Year

Bloomberg News

Romania’s central bank cut its 2013 inflation forecast for the third time this year as slower price growth paves the way for interest-rate cuts.

The Banca Nationala a Romaniei predicts year-end inflation at 1.8 percent, compared with August’s 3.1 percent estimate, Governor Mugur Isarescu said today in Bucharest. It also lowered next year’s projection to 3 percent from 3.1 percent, he said.

Policy makers, who have resumed a rate cutting cycle in July after more than a year of pause, cut the benchmark rate to a record-low 4 percent on Nov. 5 and said there’s still “some room” for further reductions. The central bank is lowering borrowing costs to fuel economic growth that slowed between April and June after reaching its fastest in 1 1/2 years in the previous three months.
“We have an obvious improvement in inflationary expectations and the public perception encourages us to believe that this is a long-term trend,” Isarescu said.

Inflation slowed to 1.9 percent in September, the lowest level since May 2012, from 3.7 percent in August. Prices declined 0.6 percent from the previous month after the government cut the value-added tax for bread to 9 percent from 24 percent. October inflation data will be released Nov. 11, according to the Statistics Institute’s website.

The inflation rate to temporarily fall below 1.5 percent in the first half of 2014, according to Isarescu. Next year’s forecast is 3 percent “because the effect of the decline in the value-added tax for bread will fade from September and the favorable impact of the decline” in volatile product prices will also disappear, he said today.
The government last week increased this year’s economic-growth estimate to 2.2 percent from 1.9 percent amid a bumper harvest. The International Monetary Fund and the European Union also estimate 2.2 percent growth this year. The IMF sees year-end inflation at about 2 percent, Andrea Schaechter, the fund’s mission chief to Romania, said Nov. 5.

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net; Irina Savu in Bucharest at isavu@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net

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