Romania Inflation


Romania: Inflation fell in July as effect of last year?s tax increase waned

August 10, 2011

In July, consumer prices dropped 0.35% over the previous month, which followed the 0.29% fall recorded in June and marked the second monthly drop. The decrease was the result of lower food prices, which more than offset higher prices for services. Annual headline inflation plunged from 7.9% in June to 4.8% July, as the effect of last year's value added tax increase waned. The reading represents the lowest level since June 2010 and overshot market expectations that had inflation dropping to 5.3%. As a result, annual average inflation dropped from 7.8% in June to 7.6% in July. At its 3 July meeting, the Central Bank left the monetary policy rate unchanged at the record low of 6.25% for the tenth consecutive meeting, as inflation slows and policy makers seek to rekindle economic activity amid the U.S. and European debt crises. The Bank will next meet on 29 September. The Central Bank has set a 3.0% inflation target for this year with a 1.0 percentage point tolerance margin. However, the Bank cut its forecasts of year-end inflation to 4.6% from the previous 5.1% forecast this year, and to 3.5% from 3.6% in 2012.


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