Feb. 7 (Bloomberg) -- Romania’s central bank kept its inflation forecast unchanged for this year, as price-growth will probably slow in the second half and will compensate for an increase caused by higher energy prices in the first half.
Inflation will probably end this year at 3.5 percent, unchanged from a Nov. 7 forecast, and at 3.2 percent in 2014, Banca Nationala a Romaniei Governor Mugur Isarescu told reporters as he presented the bank’s quarterly inflation report in Bucharest today. That meets the bank’s 2013 target of between 1.5 percent and 3.5 percent.
“The bulk of administered price increases will take place in the first half of this year and that’s why inflation will remain above the central bank target throughout the first six months,” Isarescu said. “We expect the inflation rate to re-enter the targeted band in the last part of this year and remain inside it in 2014.”
The Romanian central bank halted a rate-cutting cycle in May last year, bucking an easing trend in the region needed to spur economic growth as a government plan to free regulated energy prices and drought-driven food prices quickened inflation.
“The contribution of the demand deficit remains significant because it pulls the inflation rate down and the inflationary expectations, fortunately, have eased,” Isarescu said.
Inflation accelerated more than forecast in December to 4.95 percent, exceeding the central bank’s 2012 target, on rising food and electricity prices. The bank had targeted inflation of between 2 percent to 4 percent at the end of 2012.
The leu declined 0.4 percent to 4.4042 per euro by 12:10 p.m. in Bucharest today, the lowest since Jan. 9, according to data compiled by Bloomberg.
“We believe the leu is now trading in an area which poses no major problems,’’ Isarescu said. ‘‘The foreign capital inflows can deviate the leu from its fair value and that’s why the central bank is trying to alleviate these moves through its managed floating policy.’’
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