Romania Cuts 2013 CPI Forecast for 2nd Time This Year

(Corrects interest rate in fourth paragraph.)

Romania’s central bank lowered its 2013 inflation forecast for the second time this year, with a bumper harvest and a cut in the tax on bread sales poised to drive down prices and make room for further policy easing.

The Banca Nationala a Romaniei forecasts year-end inflation at 3.1 percent compared with a prediction of 3.2 percent in May, Governor Mugur Isarescu said today in Bucharest. The bank also cut its 2014 projection to 3.1 percent from 3.3 percent.

“The inflation rate may fall toward the 2.5 percent target toward year-end and even earlier,” Isarescu said. “The main drivers that will push inflation lower are food products as we’ll see falling prices for these products from July through September.”

The central bank accelerated monetary-policy easing on Aug. 5, when it cut its main interest rate by a half-point for the first time since March 2010. Policy makers reduced the rate to a record-low 4.5 percent as inflation is set to slow to within their target band in the second half of the year.

Inflation quickened to 5.4 percent from a year earlier in June from 5.3 percent in May and may slow to less than 4.5 percent in July, Isarescu said Aug. 5. The central bank is targeting a 2013 inflation rate of 2.5 percent, plus or minus one percentage point.

Gross domestic product advanced 2.2 percent from a year earlier in the first quarter, accelerating from a 1.1 percent pace in the previous three months. The economy will grow 1.9 percent this year, exceeding the previous forecast of 1.6 percent because of a pickup in export demand, Budget Minister Liviu Voinea said July 29.

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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