Romania: Inflation unexpectedly eases in June
July 11, 2011
In June, consumer prices dropped 0.29% over the previous month, which contrasted the 0.21% increase recorded in May and marked the first monthly drop since August 2009. The decrease was the result of lower food prices, which were only partially offset by higher prices for services. Annual headline inflation fell from 8.4% in May to 7.9% June, which represents the lowest level since February and defied market expectations that had inflation rising to 8.5%. Despite the drop, annual average inflation rose from 7.5% in May to 7.8% in June. Regardless of high inflation, at its 29 June meeting, the Central Bank left the monetary policy rate unchanged at the record-low of 6.25% for the ninth consecutive meeting as the Bank expects inflation to moderate in the second half of the year. In addition, the Bank maintained the same reserve requirements on both foreign-exchange and leu-denominated liabilities. The Bank will next meet on 3 August. The Central Bank has set a 3.0% inflation target for this year with a 1.0 percentage point tolerance margin. However, the Bank forecasts year-end inflation at 5.1% this year, and 3.6% in 2012.